IR35 - Golden Opportunity or Existential Threat
IR35 is all over the accoutancy scene like a rash and everybody is beating themselves up over it but as a practice broker who speaks to lots of firms of all sizes, it has got me thinking more deeply and maybe you should be doing to so.
I recall the golden years of contracting in the run up to turn of the century. Millennium Bug (no vaccine known) led to the scramble for fixes and the IT industry mushroomed along with my own business as a company formation agent - I was the man behind Formations direct until 2015.
Company formation agents faced the spectre of extinction themselves throught the noughties and beyond as Companies House threatened and finally did allow the great unwashed British public to cut out the agent. This was our IR35 moment and decisions needed to be taken.
Accountancy firms who have a lot of IR35 clients need to think out of the box, as I had to do all those years ago, so what options exist?
- Do nothing and see how things develop
- Quit practice
- Reinvent your practice
- Build another business
Option 1 is reactive, which can at times be sensible, but in this instance it is not. It is likely that clients will come to you for guidance but it is not advisable because you need to get in touch with them with a viable plan that works for them. The odds are that if you are not talking to them somebody else is and you'll only find out once they have left you.
Option 2 means selling up and getting whatever value you can for the client bank, but it is probably too late to achieve the full value if you are focused mainly on contractors. For most sellers it means retirement which is a whole new discussion beyond the scope of this piece.
Option 3 means turning your back on contractors or finding a solution for them. You may have the requisite skills and experience but it won't happen overnight and your loss of income in the interim will hurt. Maybe you could merge or buy another practice to ease the pain of the transition, but either way be prepared for hard work in the short to medum term.
Option 4 means doing something else while your practice either winds down or is reinventing itself. Once again, it means hard work and focus on something else, but your accountancy skills will be invaluable. Just take your time researching what you might want to go into.
So there is a lot to consider and it is definitely worthwhile talking it over with a friend or colleague, even if they are not in the accountancy field as a fresh perspective from the outside always helps at critical moments like this. AccountingWeb is full of opinions and articles (just like this one) and as you can see the picture is mixed, but one thing is clear and that is you cannot keep your head in the sand.
Look on it as an opportunity, maybe that big push that deep down you've been waiting for but couldn't quite bring yourself to grasp. Either an earnings opportunity or a fresh career start.
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Henley Business Brokers are independent specialist business brokers and business transfer agents, working collaboratively with accountants, focused on owner managed companies in the Manufacturing, Engineering, Fabrication, Industrial, Distribution, IT and B2B Service sectors, with turnovers of between £0.5 million and £10 million.