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  • February 17, 2021
  • Gareth Morris

Does Furlough affect IR35 status?


Does Furlough affect IR35 status?

Hi Jeni, will furlough impact IR35 determinations in the future?


Jeni Says:

A contractor working through their own limited company is the only engagement type for which IR35 status is a consideration. These contractors are employees of their own limited company and therefore only they can determine if furlough is a suitable option for them. Furloughing themselves would allow them to access the 80% grant (to a maximum of £2,500 per month) however, this 80% is only based on PAYE earnings, not dividends. This means it’s likely that limited company contractors would be accessing significantly less than 80% of their pre-Covid income. It’s unlikely that a contractor furloughing themselves would affect IR35 status but a client pausing the use of a contractor and the contractor guaranteeing to come back to the client at X point in the future would likely undermine some of the key principles of IR35 status. We would therefore recommend using short working as an alternative to retain contract talent in those circumstances.

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Short Working 

'Short working' is the term used for stretching out the length of a contractor's contract in order to lower their days in work and, as such, spread their cost. 

This may be an action taken when the contractor is working on a project you want to suspend but want to lose the talent they provide. 

There are several reasons a company may want to extend the contract of their contractors and reduce the billable days they work.

  1. Allows you to retain project progress while reducing overheads

  2. Retains vital talent and won’t leave you scrambling for talent when the lockdown is lifting and normal working practices resume

  3. Gives Contractors time to look for and bid for other projects

  4. Gives Contractors piece of mind

About Jeni, Head of Compliance

Jeni is Evolution’s Head of Compliance. She helps both Clients & Candidates in understanding, preparing for, and dealing with the consequences of new and updated legislation. 

Her deep understanding of all the laws, regulations, contractual requirements and industry practice that affects recruitment, labour supply and employment make her an invaluable point of contact for anyone operating in the ever-changing landscape of the working world. 

For Clients, Contractor Groups and the wider business group she provides audit services to assess risk and legislative requirements, develop innovative solutions and execute a commercially sound, legally robust action plan.

Jeni has experience as a Compliance Manager & Data Protection Officer with additional qualifications as a Lead Auditor, Project Manager, Risk Assessor and Health and Safety Professional in addition to her reading of the law. 

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