Tax compliance has become a key concern when hiring limited company contractors following the off-payroll working rules (IR35 reform) which put increased compliance requirements on businesses engaging these vital workers.
Now over two years past the rules’ introduction, end clients and recruiters should continue to ensure outside-IR35 workers are engaged compliantly.
We’re here to help you hire contractors with peace of mind.
For many hiring organisations, knowing your obligations under the off-payroll working rules (OPW) will go as far as getting to grips with what the rules are. However, if you’re engaging with recruitment agencies and consultancies, checking the arrangements for contracted-out services is a crucial step in your compliance with the off-payroll working rules (OPW).
Fully contracted-out services shift the responsibility for determining IR35 status to the consultancy or agency providing these services, which changes your obligations under the rules. This seems straightforward but defining fully contracted-out services as genuine can be more tricky than it seems. Find out more.
In HMRC’s recent guidance, they state that “There should be no uncertainty around where responsibilities lie. You should record how you have reached your conclusions, and retain records. Both you and the service provider should be clear about which party has the client responsibilities under the off-payroll working rules.”
A Business Risk Review (BRR+) is a risk assessment by HMRC that reviews your systems, internal governance, and approach to tax compliance. They’ve been around since 2019 and only apply to businesses with an annual turnover of £200m or more, as well as complex businesses or businesses in complex industries with lower annual turnover.
Keeping the right records is good compliance management regardless, however, we have found that some of the off-payroll compliance cases we have handled this year stemmed from these Business Risk Reviews which now include how you manage IR35 and employment status.
Whilst the teams which handle BRRs and OPW will be different, any indication of non-compliance in one may well lead to an enquiry in the other. It’s important to ensure that all compliance is effectively managed to prevent something of a compliance snowball from forming.
HMRC has also recently released additional guidance on the records businesses need to keep for the off-payroll working rules. These include but aren’t limited to; communications with third parties in the supply chain, status determination statements issued or received, and the outcomes of disagreements. Click here for the full list.
The Employment Status Manual (ESM) is an in-depth guide used by HMRC’s tax inspectors as well as the public. It’s available online and covers all areas of employment status, including Chapter 8 (classic IR35), Chapter 10 (the off-payroll rules), and HMRC’s Check Employment Status for Tax tool (CEST).
Any persons responsible for determining IR35 status should familiarise themselves with its contents, especially if using CEST.
HMRC released the Check Employment Status for Tax (CEST) tool to help engagers assess the IR35 status of their contractors. Whilst it’s free and easy to use, we don’t recommend using it in isolation. The tool only provides a result in 79% of cases, misses key status tests, and is a rigid checklist that the House of Lords found “not fit for purpose”.
With Qdos Status Review, however, we will provide a determination in 100% of cases, cover all IR35 status tests, and insure the results. You’ll also get support from our expert team.
Don’t forget to issue a Status Determination Statement and ensure you follow all guidelines in handling disputes and keeping records (Qdos Status Review will handle all of this for you).
Due to the strength of some status tests such as the right of substitution, conducting a role assessment can be beneficial in attracting top talent. A role assessment is a limited version of an IR35 assessment based on key factors about the role and how you expect the contractor to operate.
Many contractors, particularly those who are highly skilled and experienced as contractors, will be on the lookout for outside IR35 roles. On the flip side, knowing a role is inside IR35 will help reduce wasted time for everyone in the recruitment process.
You should include the result when advertising the role and make it clear that you’ll review the determination following the onboarding process.
If you’re using Qdos Status Review, we recommend referencing this as well. You can link to our webpage which explains Qdos assessments to your contractors, allowing you to showcase your commitment to fair assessments and attracting the best contractors for the role.
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