IR35 has been a significant consideration for businesses in the private sector since its implementation in 2021. As HM Revenue & Customs (HMRC) actively reviews and assesses compliance with the off-payroll working regulations, it is essential for organisations to prioritise their efforts in meeting these requirements as they prepare for potential scrutiny from HMRC regarding IR35 compliance.

Training your staff

Properly training your staff is crucial when it comes to complying with IR35 regulations. It is essential to cover the off-payroll working rules, the responsibilities of different parties in the contractual chain, and how to accurately determine employment status.

To ensure knowledge retention, employ varied training methods and include measures to assess understanding. Additionally, make relevant documentation easily accessible to support key steps in the status determination process. Any updates or changes should be communicated effectively, with additional training provided as necessary.

Record keeping

Comprehensive record keeping is vital to demonstrate your adherence to IR35 regulations. Should HMRC open a case to investigate your IR35 practices, they will expect detailed information to be produced. Maintain records for all engagements subject to off-payroll working rules, regardless of whether the outcome is in or out of scope of IR35 and ensure they are kept up-to-date and include any reassessments for long-term assignments. Documentation should clearly indicate how off-payroll working rules were reviewed and how IR35 processes were implemented for each assignment.

Considering the requirements of a new role

Determining the hiring arrangement properly is essential part of the process. If you decide to engage a recruitment agency for hiring, communicate the outcome of your initial IR35 status determination, including the worker’s expected operating model and whether their role falls within or outside the scope of IR35. In the case of not allowing workers to engage through their intermediaries, relay this information to the agency. If a different hiring process designates someone else as the deemed employer, establish clear processes to ensure accurate implementation of status determinations and deductions.

If uncertainty exists, it is recommended to conduct an individual IR35 assessment to ensure compliance. During the interviewing process, record information shared and captured that can assist in determining IR35 status. This includes details about working practices, individual arrangements agreed upon, and the terms and conditions of the assignment.

Considering your off-payroll working population

Your organisation should also have robust processes in place to help manage indirect workers and capture all necessary information for them and their assignments. If you are the client but not the deemed employer, interact with agencies and intermediaries to obtain these required details – it is your responsibility to identify all off-payroll workers in your supply chain and determine their status, and request details from all stakeholders involved in the supply of such workers.

During regular reviews of both directly and indirectly engaged off-payroll workers, it is possible to discover workers who were previously missed in workforce records. In such an instance it’s important to promptly assess their status to determine if IR35 applies. If deemed applicable and insufficient tax has been processed for the worker’s assignment, this should be reported to HMRC for resolution. HMRC provides an online service for voluntary disclosure of unpaid PAYE tax liabilities, which requires the individual’s National Insurance and tax information, as well as the user’s Government Gateway account details.

And that’s just the start

IR35 can be a tricky topic to navigate, and the advice above covers just some of the basic considerations you’ll need to take to get started – but by focusing on these areas, organisations can demonstrate their commitment to IR35 compliance and mitigate the risk of scrutiny from HMRC.

If you’re interested in a more comprehensive overview covering everything you’ll need to be aware of and action to guarantee IR35 compliance across your workforce, Linx have developed a free whitepaper with key advice, access to additional resources and guidance, and our own thoughts on how best to navigate the challenges posed by this complex legislation. Please feel free to download and if your business is looking for further support from experts well-versed in supporting organisations with their management of IR35, contact us for a chat around how we could help.