Business, Finance, Scale-up advice

IR35: How construction firms can take back control

8 February 2023  |   6 minutes read
Example of a large construction project affected by IR35 reform.

While the reception to short-lived Chancellor Kwasi Kwarteng’s mini-budget was largely negative, his changes to IR35 fostered a positive sentiment among the construction industry. IR35 (and subsequent reforms) had created an administrative headache for companies and contractors.

The rancour around IR35 is long-running, so it’s worth zooming out for context. In 2017, HMRC imposed a duty on public sector bodies to determine the employment status of contractors. A status determination statement (SDS) would be used to determine whether a contractor was an employee or a worker.

If they are a worker, then the body is obliged to bring them into payroll. In 2021, HMRC expanded this condition to medium and large private sector companies. These changes were, to say the least, unpopular.

Once Kwarteng’s short-lived tenure ended, however, his successor Jeremy Hunt scrapped pretty much all of his reforms.

IR35: in out, in out, shake it all about

Buckle up because this one gets complicated.

At the end of 2021, more self-employed people worked in construction than any other UK industry. That’s 810,000 self-employed construction workers to be exact.

So the impact of IR35 reforms that came into effect in 2021 was felt more strongly by construction than any other industry. Firms now had to complete an SDS for every contractor they utilised. The situation left many construction sector leaders and bodies pleading for help.

A u-turn followed by a u-turn

Then in swooped Kwasi Kwarteng’s Growth Plan 2022. Kwarteng pledged to scrap the whole thing from April next year. A reform that would have stripped away a layer of complication from the way construction companies do business.

As mentioned, however, Hunt u-turned on Kwarteng’s u-turn. And the SDS (and its related bureaucratic headaches) will remain in situ.

In a statement for Construction News, Andy Chamberlain, director of Policy at the Association of Independent Professionals and the Self-Employed (IPSE), called the announcement “a huge blow to thousands of self-employed contractors and the businesses they work with.”

“The reforms to IR35 have created a nightmare for businesses seeking to engage talent on a flexible basis. Businesses that were looking forward to an era of less complexity and less cost will have had those hopes dashed,” said Chamberlain.

Company spending: take the lead

There are a lot of things up in the air at the moment. Uncertainty abounds and this creates especially difficult circumstances for construction firms.

Construction accounting is a constant, iterative process. Your software is (or at least should be) constantly updated once a week with expense reviews, your cash flow, any updated employee information and invoices generated.

An expense platform like Soldo makes this simple through integrations with software such as Sage and Netsuite This integration makes construction accounting simpler for finance teams.

No more paper, no more detective work trying to untangle mysterious spending or timely reconciliation. Finance teams can attain a new level of control, while also empowering employees with pre-paid cards.

Soldo provides a healthy dose of certainty at a time when it’s sorely lacking for construction firms.

Keep your construction projects on track

Your expenses policy is hampering your major projects, damaging morale and burying your finance people in a morass of admin. Tinkering won’t cut it. It’s time for something totally different.

Find out more here and see how Soldo can help.

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