IR35 Changes and Legal Recruitment: What You Need to Know

Introduced in 2000, IR35 regulations aim to prevent tax avoidance by individuals working through limited companies while effectively operating as employees. In April 2017, the rules tightened for the public sector, shifting responsibility to employers to determine tax status for interim workers.

Inside or Outside IR35?

Determining IR35 status is complex and depends on factors like:

Level of control and management
Right of substitution
Equipment used
Integration into the organization
Contract terms and previous IR35 status

Hiring managers make the decision, supported by worker-provided details, a process that can be time-consuming and challenging.

Impact on the Public Sector

The 2017 reforms caused disruption:

Increased administrative burden
Loss of skilled talent and exacerbated shortages
Rise in non-compliant umbrella models
Contractors overpaying tax due to blanket decisions

Despite this, the interim market remains buoyant, with higher rates and strong demand for legal professionals.

What’s Changing for the Private Sector?

From April 2020, IR35 rules will extend to the private sector, applying only to medium and large businesses. While definitions of size thresholds are awaited, the impact will be significant for interim lawyers and contractors.

The Interim Market Outlook

Despite tax changes, interim roles remain attractive due to:

Flexibility and work-life balance
Ability to bring in expertise without permanent headcount
High demand and competitive rates

Many contractors are moving to umbrella companies or PAYE models, but opportunities continue to grow.

Summary

IR35 reforms will reshape private sector contracting, but as seen in the public sector, the market will adapt. Interim work offers benefits beyond financial gain, making it a viable and rewarding option for legal professionals.

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