WHY IR35 COMPLIANCE IS ESSENTIAL FOR YOUR ORGANISATION

First the Government’s mini-budget announced a repeal of the IR35 off-payroll legislation – and then as fast as the decision was made, the new Chancellor reversed it.

Whilst it’s still uncertain whether this will be the last set of plans a new Government may have for IR35, it’s clear that end clients still need to maintain compliance across their contractor workforce and understand how any changes could impact them.

What changes WERE proposed?

The main change proposed was for the responsibility of determining IR35 status for off-payroll working, to move back to the worker. This is something that previously happened when IR35 was first introduced into the public sector. Before its introduction in the private sector saw a reform which shifted the status determination responsibility to the end client.

The Government’s proposed amends to the IR35 off-payroll working regulations would have seen the tax liability burden also move back to the worker – which currently sits with the end client engaging the worker to perform their duties.

What’s clear in recent weeks though, is that there’s still a lot for the Government to consider before progressing any future plans to change IR35. Any changes would also need to gain royal assent through a finance bill before they could be implemented. As the repeals in Government and ever-changing external factors continue at play, it looks like there’s a lot more to consider before any permanent changes may come to light.

WHAT SHOULD ORGANISATIONS BE DOING TO REMAIN COMPLIANT?

There’s a number of things you might want to do to ensure you’re up to speed with how IR35 compliance is managed across your organisation.

Understand your contractor workforce

Make sure you have full visibility of your contractor workforce, both in and out of scope assignments. Understand which models inside IR35 workers are currently using. Are they opting for umbrella companies? Continuing to work through their limited company via deemed payments? Or on the payroll of your preferred recruitment agencies?

Consider the impact to your recruitment supply chain and compliance management if a large number of workers wished to move back to limited company off-payroll working should any further changes be announced.

If your organisation opted to implement a blanket ban on limited company workers, would this still be your stance if another repeal was announced?

Ensure you have a robust compliance strategy

It’s crucial that end clients and their recruitment supply chain have the right checks and balances in place to ensure those determinations would stand up to scrutiny.

HMRC will still be looking for end clients to demonstrate they are not taking status determinations at face value without digging any deeper. With evidence available, if questioned, to show a thorough assessment has been made.

CONSIDER AN IR35 COMPLIANCE AUDIT

Many organisations are keen to stay on top of IR35, by undertaking a comprehensive compliance audit. Evaluating how IR35 determinations are currently made, checking the effectiveness of hiring manager training to ensure colleagues fully understand the principles of IR35, and most crucially assessing supply chain compliance.

Our IR35 experts at Linx work with organisations to deliver compliance audits that are tailored around their business and supply chain requirements. Helping to proactively identify areas for improvement whilst ensuring transparency.