IR35 Oil and Gas Sector Worries Over Shrinking Contractor Talent Pool

IR35 Oil and Gas Sector Worries
IR35 Oil and Gas Sector Worries

IR35 Oil and Gas Sector Worries

Many companies have IR35 oil and gas sector worries when the Government implement the IR35 changes in April 2020. Many of those using freelancers in the North Sea are worried about the effect on the contractor market of those changes.

Some fear that, with an effective massive pay cut, freelancers will simply take their skills abroad where they can earn more. Companies are also worried that this competition for top oil and gas sector talent will force contract rates upwards.

Contractors With IR35 Oil and Gas Sector Worries

Contractors who work in the oil and gas sector are used to working away from home. After all, no one lives in the North Sea. So, moving abroad to work is not that great a disruption for them as they are already used to temporarily living and working offshore.

The most important change in the new IR35 rules is that the contractor will no longer decide his or her own IR35 status. This will be decided by the hiring company. Companies can use HMRC’s much criticised online IR35 test tool Check Employment Status for Tax (CEST).

Penalties From IR35 Oil and Gas Sector

If companies decide that a contractor is outside IR35 but it is later proved that he or she is inside then someone will have to pay the back taxes, interest and penalties.

In the first instance it will be the contractor who has to pay. However, if they default on that the Agency will have to pay. If the agency default then the hiring company will have to pay.

Some Companies Will No Longer Hire Limited Company Contractors

This potential financial liability is terrifying some companies so much that some are already saying that they will no longer use companies who operate via limited companies. Those companies in the oil and gas sector have not said what they will do yet.

They do, now, have an incentive to help contractors stay outside IR35. Other companies, like RBS in the banking sector, have issued their contractors with guidelines on how to stay outside IR35. Changing the contracts they have with contractors and their working practices could go a long way to keeping their contractors outside IR35. This would apply in the oil and gas sector too.

IR35 Oil and Gas Sector Worries About Contractors Going Overseas

It’s still an unknown how many contractors in the oil and gas sector will simply look for contracts overseas because of the extra tax burden on them. This is basically a massive pay cut for them. If there is a substantial number who do this it will have a massive effect on oil and gas companies operating in the North Sea. This would force up rates.

Extra IR35 Tax Revenues for Government and HMRC

The Government believe that this IR35 change will bring in £2.9 billion in extra tax revenues. However, what they cannot measure is the financial impact on British industry of the implementation of this tax. If companies costs are higher and their profits lower then they will pay less in tax. However, you won’t find the Government and HMRC trying to measure his to subtract from the £2.9 billion they expect to receive.

These IR35 oil and gas sector worries will add to the uncertainty in the industry.

See How Companies Can Help Contractors Stay Outside IR35

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