“There is a lot of talk about how to ‘avoid IR35’. The simple answer is: You can’t.”

Sikorsky S-92A Helicopter

Our take on the IR35 Off-Payroll Working Rules in the UK and how it will affect the aircraft maintenance industry.

There is an awful lot of noise in the UK at the moment about the changes to the Off-Payroll Working Rules (IR35) in April, so we thought it worthwhile to put down some of our thoughts. We are in a pretty unique position in that we are a UK based company that does almost no work here. The markets where we are strongest are the ones which are already 10-15 years further down the road with similar legislation, so for us it’s nothing new.

For example, aviation contractors have been working PAYE in Norway, the Netherlands and Germany for more than 10 years and this has generally been accepted by both companies and workers. The difference between these territories and the UK is that the companies in these other countries have accepted that there is a higher cost for using contractors as they have to pay a decent rate that will cover the taxes as well as accommodation and travel. Too many UK companies have relied on the cheap labour that engaging people through Personal Service Companies allows. They push all the costs to the individual contractor and this is only possible if the contractor is able to avoid paying as much tax as possible.

There is a lot of talk about how to ‘avoid IR35’ as an individual contractor. The simple answer is: You can’t. The change in the law makes it the responsibility of the end-user (client) to decide whether you are inside or outside the rules. The decision rests with them and the responsibility rests with them if HMRC decide they applied the rules wrongly. This is exactly the same as it is in the Netherlands, Norway and other European countries.

To be truly an ‘Independent Contractor’, you really need to be able to decide when you work, who does the work and have some responsibility for the success of that work. If you are told what shift to work, that it has to be you personally that does that shift, and you are under the signatory of the company, you are not an Independent Contractor. Whether you work direct with the client or through an agency has absolutely no bearing on the decision.

We’ve said before that we see two major outcomes. Firstly, those UK aircraft maintenance companies that rely heavily on contract labour are going to have to change their business model or go out of business. Secondly, the market will have to become more like it is in Norway, Germany and the Netherlands where contractors are used more selectively and that the costs for using them are properly borne by the end-user rather than expecting the individual contractor to carry all the risk and cost.