The science of compliance

15 July 2021

Companies ignore new changes to IR35 tax regulations at their peril, says Perry Balls, Director of Next Geosolutions. It's why his firm has taken a pro-active approach to the issue, with the help of Atlas Professionals. 

Perry Balls has seen a huge amount of change during his 35 years at the forefront of the offshore industry. But constant progression is one of the things he loves about his job. “Innovation is at the forefront of all we do,” he says. “The technology we use is dynamic and ever-changing. It's what makes this sector so fascinating.”

Perry has also enjoyed the opportunity his career has given him to travel the globe. “That's been a big attraction for me,” he admits. “I consider myself to be extremely fortunate because, through my work, I've been able to go pretty much everywhere in the world. Also, the people in our industry — which is quite small, really — are so nice. That's another big plus.”

Since 2017, Perry has been General Manager/Director of Next Geosolutions, an international turn-key geoscience and offshore engineering support service provider operating in the energy, infrastructure and utilities markets. Formed in 2014 with the backing of the Italian OSV owner Marnavi Offshore, the company's clients include European electricity transmission system operator TenneT, which recently awarded Next Geosolutions a contract to carry out cable route surveys on three wind zones in the Dutch North Sea. But whoever the client and whatever the contract, Next Geosolutions always upholds the highest standards of safety, performance, integrity, sustainability and innovation, while being committed to providing equal opportunity and fair treatment to all individuals. 

The importance of IR35 compliance 

Atlas Professionals has been working with Next Geosolutions since 2015, when it exclusively supplied personnel for the company's Monita cable route survey in the Adriatic Sea. Currently, Atlas is supporting Next Geosolutions' project for TenneT. “We rely on finding the best, most trustworthy personnel, be it a data processor, surveyor or engineer, or someone more senior,” explains Perry. “Atlas has become our go-to recruitment company because it understands our industry so well, and knows the calibre of people we're looking for.”

Atlas and Next Geosolutions are also on the same page when it comes to the importance of IR35 regulations, first rolled out in 2000 by HM Revenue and Customs (HMRC) to ensure that tax and social security compliance is upheld by businesses. Recently, however, IR35 regulations have been reformed to make it the responsibility of the end user (most often the client company) to determine the status of a contractor's 'independence'. HMRC believe this will ensure that contractors who are working using a Limited Company (Personnel Service Company) are genuinely independent, and that both individuals and companies are transparent and compliant in their employment routes. changes to IR35 regulation came into force on April 6 2021. 

If a contractor is deemed to be 'inside IR35' (i.e., providing a service of employment, not self-employment), then income tax, and employee and employer national insurance contributions may  be liable at source. If the company engages with the contractor directly (and not through an intermediary such as a recruitment agency), the company is deemed as the fee payer and responsible for the accounting and deduction of the relevant taxes. In essence, this requires the added step of calculating the relevant tax and Class 1 Employee National Insurance contributions, as well as paying employer's contributions.

However, if the company engages the contractor through another intermediary, then the intermediary closest to the contractor becomes the fee payer, and is responsible to administer and pay over the relevant tax and social security contributions, whilst the responsibility for determining the contractor’s independence status remains with the end user. These will include employer's and employee's elements of social security, as well as income tax. 

It's a major shift to the way that companies use contractors, and should not be underestimated, notes Perry. “Changes to IR35 have had a significant impact on our operations,” he says. “The hardest thing has been explaining to contractors what these new HM Revenue and Customs (HMRC) regulations mean for them and for us, and the very real risks we face for non-compliance. The fact is that we are now responsible for ascertaining the IR35 status of our personnel, otherwise we risk being accused of disguised employment and tax avoidance by HMRC.” 

This isn't just a tax issue, either. Getting a determination wrong — and having an individual deemed as 'employed' rather than 'independent' — has many other employment legislation impacts on areas such as holiday pay, sickness pay, pension, and agency workers' regulations. That’s why no company can afford to bury their head in the sand on this issue anymore, insists Perry — although some recruitment agencies try. “There are agencies that have remained silent about IR35,” he reveals. “As a result, we no longer deal with them. Others, however, are prepared to work with us to ensure IR35 compliance, and Atlas is one of the agencies that stands out.” 

A forward-thinking approach 

Transparency between Next Geosolutions and Atlas has been key to building a successful, forward-thinking approach to IR35 compliance, says Perry. And it's worked well. “From our side, we were concerned that contractors might react adversely if we deemed them to be 'inside IR35', but that hasn't been an issue for us. In fact, Atlas have informed us that our pro-active stance on compliance has been well-received by most personnel, who are more flexible in their approach towards working with us. That's extremely gratifying.”

Going forward, Perry is optimistic about the future for Next Geosolutions. “We're still working on a mix of oil and gas projects, although the majority of our focus is on the renewables sector,” he says. “There are Brexit-related challenges to overcome, such as work permits and licenses for personnel moving between the UK and Europe. But because we are a company with operations in The Netherlands and Italy, we're able to deal with these types of teething problems more easily.”

And thanks to Next Geosolutions' healthy order book and outlook, the company is expanding at a dramatic rate. “We are currently running a very active recruitment campaign,” says Perry. “At the moment we have around 200 employees but expect to increase this figure by approximately 50 per cent within the next 12 months. So, the future is looking bright.”