IR35 and what end clients should be doing 12 months on

It’s hard to believe that it’s now been one year since HMRC introduced the IR35 reform into the private sector in April 2021.

After the initial rush for organisations and their supply chains to ensure they were compliant, the off-payroll working legislation quickly became business as usual. This should be the case, as uniformed processes across organisations will ensure appropriate IR35 checks are undertaken for all Personal Service Company (PSC), or Limited Company,  worker assignments. It’s important however to ensure that measures are in place to gauge their continued effectiveness and compliance.

Remember the golden rule

IR35 applies to an assignment, not the worker. Meaning an individual Status Determination Statement (SDS) will need to be created for each assignment. Where contingent workers operate through a PSC and are engaged on multiple assignments throughout the year, each of these must be treated separately. Some may be in scope, whilst some may not require IR35 to apply.

Where individual off-payroll workers have multiple in and out of scope assignments, as the End Client do you have a clear evidence trail across your supply chain? Are you able to demonstrate that the payroll working rules were fully assessed for each engagement?

Regularly review your Status Determination Statements

Some in scope assignments may be more long-term, making it extremely important that the SDS remains relative and reflective of what the working arrangement actually looks like in practice. Making time to periodically review and refresh status determinations against the IR35 rules can be an effective way of identifying if the original SDS was accurate.

Has the off-payroll worker been given the right to provide a substitute? Has there been a large amount of supervision, direction and control initiated by your permanently engaged workforce? Is the worker continuing to carry the financial risk, or have you begun to include them in internal processes? If you took a look at a distance, would you think they were now part and parcel of your organisation?

Take a look at your status disagreements

Taking an in-depth review of your past status disagreements, can give you some good insight into what the majority of objections were focused around.

How many of those that were in scope were reassessed and determined as out of scope? Of those, were there any contributing factors that may have caused the incorrect determination? Can your organisation effectively demonstrate that adequate training was provided to those colleagues making Status Determination Statements in line with HMRC’s requirement for reason care?

Evaluate compliance within your supply chain

The responsibility for making the SDS sits with you as the End Client, but the management of Income Tax and National Insurance Contributions often falls to your supply chain as the Fee Payer following the IR35 assessment. It’s therefore crucial that you have the confidence that SDS outcomes and deductions are being managed effectively within your supply chain.

That’s why we work with our clients to create tailored IR35 auditing solutions to engage their supply chain and check for compliance. Providing an independent, external consultancy service that scrutinises IR35 processes and proactively identifies improvements that could be made to ensure compliance with the intermediaries legislation.