IR35 Support

Anyone your company engages through a Personal Service Company (PSC), sometimes referred to as a Limited Company, needs to be assessed for IR35 purposes. These are contingent workers that HMRC refer to as off-payroll workers, because they operate independently through their own business, providing services to your organisation as opposed to being employed by you or your supply chain to perform work. 

IR35 is HMRC’s test to determine whether the off-payroll worker is operating compliantly as an independent contractor and is not working in a similar way to a directly employed worker who is engaged through a Pay As You Earn payroll, where tax and National Insurance are deducted at source. 

The End Client, the company who the work will be performed for, must complete what is known as a Status Determination Statement (SDS). HMRC recommends this is completed by using their online IR35 status tool, Check Employment Status For Tax (CEST), which asks a range of questions about working practices to create an outcome of in or out of scope. 

An SDS is needed for each individual assignment a contingent worker is engaged to deliver; it is not permitted to make one assessment of the worker themselves to use across multiple engagements. Where working practices change or the worker’s remit is altered, a new SDS will need to be created. 

Where the outcome of the SDS indicates in scope, this means that IR35 applies, crucially the working practices are too similar to how a directly engaged worker is employed. As a result, the contingent worker has been identified as a Disguised Employee and tax and National Insurance deductions need to be made on their earnings, a process known as deemed payment. 

An out of scope SDS means that the contingent worker has not been identified as a Disguised Employee and their working practices have determined that they are an independent contractor. As such they are responsible for managing their tax implications through their Personal Service Company (PSC). 

Regardless of whether your organisation is hiring the contingent workers yourself or through your recruitment supply chain, your business is still responsible for making IR35 Status Determination Statements, and if investigated HMRC will look to see reasonable care has been taken and you have a good understanding of working practices and contract terms to make accurate IR35 status assessments. 

Whilst the Fee Payer, which might typically be your recruitment supplier, would be responsible for paying any outstanding tax bills if an incorrect SDS was given to a contingent worker, this liability would be transferred to your organisation if reasonable care has not been taken to come to the right determination in the first instance.