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Anyone working for the public sector will be familiar with the relatively new (April 2017) IR35 legislation which ostensibly ensures a level playing field in terms tax payments for those working as contractors and those in permanent employment within the public sector. Many would agree this should be a good thing and maybe in principle it is – but in practice CIPD report of significant disruption in the public sector for both contractors and organisations that utilise their services.

So, what is IR35 and why should the Events Industry be on its guard?

In simple terms, IR35 now places the onus on all public sector organisations to be responsible for considering whether individuals are truly self-employed OR whether, regardless of their incorporation status, they are carrying out a role that a regular employee would ordinarily undertake. If the latter is the case then the organisation, by law, needs to ensure the contractor is paid via PAYE with tax and NIC payments deducted at source.

As per usual with HMRC there is very little in black and white – just various shades of grey, but according to the guidance notes, it appears that to be truly self-employed the contractor must have an element of control over where, when and how their tasks are completed and they should be able to replace themselves with a substitute where necessary and without the approval of the organisation.

As a service provider, who doesn’t provide core ‘events’ services to organisations; uses my own equipment; only working from client offices where meetings; training; research is required, I assumed that my services would comfortably sit outside IR35. For the most part, this is true – but the second I offer any service that crosses into ‘business as usual’ such as assisting with tenders or proposals – anything in fact where I am bound by conforming to a contract that states where, how and when I do the job – HMRC’s handy little tool tells me otherwise. Even though I have Limited Company status and there is a lack of mutuality of obligations I am not automatically exempt from IR35. Don’t believe me? Check out the HMRC tool for yourself.

To be fair, I recognise that this could sound like sour grapes because as an independent service provider my tax liabilities could increase. In practice for me, it means that I am more likely to limit my services – but how would this affect the thousands of freelancers that the industry relies upon but who will fall foul of the new legislation, in that they are expected to step into roles ‘as if’ they were permanent or regular members of the organisation’s team?

If IR35 is expanded into the private sector – which experts predict will happen within the next 18 months, especially considering Mr Hammond’s failure to increase National Insurance charges for the self-employed, the structure of the

Events industry could change forever.

Unlike many other industries, Events organisations: –

  • rely upon their ability to bring in expert skills and experience for short periods depending on the project in hand
  • need the flexibility of supplementing core permanent teams to cope with shorter and shorter lead times, fluid
  • demand, and increased pressure from client procurement departments for reduced costs
  • are already suffering from reduced profit margins and will struggle further with increased freelance prices that could potentially follow
  • will find it an additional burden to manage the additional administrative task of adding and removing people from payroll on a project by project basis 

Where there are genuine cases of specialist skills being brought in then carefully constructed contracts should protect both parties but these will need to be checked against the specifics for each project and this could be costly and time

consuming. There is also the option of billing / contracting services through an Umbrella organisation – although even this method is to be treated with care and the benefit of staying outside IR35 needs to be balanced by the cost. For the most part though, where small businesses rely on temporary workers to fulfil a short-term role that an otherwise permanent employee would fill, even Limited company status will not necessarily be sufficient.

Of course, there is arguably an upside for the industry too. Given current concerns around much of our senior talent preferring freelance roles, we could find that these same individuals are less incentivised to do so and follow their public-sector counterparts by flocking back into substantive roles – thus filling the talent gaps. However, it should be considered whether the industry can afford to go back to high headcounts without depression in salaries across the sector.

Whatever your view on the freelance / contractor model – this will inevitably be yet another hit for small businesses within Events and whilst I for one believe there should be stronger barriers to entry, I also believe that the small boutique agencies and mid-range organisations have a vital role to play in keeping our industry vibrant and versatile and I would hate to see yet more companies either go to the wall or be swallowed up by ‘the big boys’ just to survive.

My concerns have already been passed to Evcom and TESA. Let’s work together to ensure this legislation doesn’t catch us by surprise.

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