With the extension of IR35 legislation to the private sector coming into effect from 6 April 2021, we can help you deal with these additional responsibilities including assistance in making status determinations and dealing with the determinations made.
Two of the areas where recruitment companies can help businesses are:
1. Assistance in making IR35 status assessments
One of the key factors in determining IR35 status is the degree of control held by the client over how, what, where and when a contractor’s services are performed. Roles based on clearly defined projects with end project deliverables are more likely to fall outside of IR35. If the majority of answers to the below questions are ‘yes’, then it’s likely the role will fall outside of IR35:
Is the contractor working on a particular project?
Is the project specified in the contract along with a set of deliverables defined in a contract schedule?
Can the contractor decide how to do the work required themselves, rather than you instructing them how to complete the work?
During the course of the engagement can you move the contractor to another area of work outside the scope of the work originally agreed?
Will the contractor be required to be present at your site within specific hours?
Does the contractor have the discretion to carry out the work away from your site (home office or other)?
A challenge for hirers is the extent to which you are able or willing to let contractors take more control and be only concerned with the end project deliverable.
Assessing IR35 status can be a complex area and can require specialist expertise. Hirers will need to prepare for the considerable time and resources required to assess each contractor assignment correctly. Under the legislation, hirers need to be able to demonstrate that they have taken “reasonable care” in making the assessments. Hirers must also introduce a process to make sure they consider the contractor’s views if the contractor disagrees with the decision.
There are tools available to assist in making IR35 determinations, the first being HMRC’s online Check Employment Status for Tax (CEST) tool. Whilst HMRC have promised to stand by the results if the correct information has been entered, CEST has been widely criticised for giving incorrect assessments and ignoring some case law decisions. HMRC have committed to updating CEST but no timing has been given for this. We are developing in-house expertise to assist our clients in making and adequately documenting IR35 status decisions. We also have specialist partners who are able to provide bespoke assessments. We can help you identify which of these may be most appropriate for your business.
2. Dealing with “inside-IR35” decisions
Where contractors are assessed as “outside IR35”, nothing has to change. However, we need to ensure a Status Determination Statement (“SDS” in the legislation) is kept on record for each assignment so that it can be provided to HMRC if requested at a future date.
Inside IR35 decisions will be a different matter, as PAYE tax and NICs will need to be deducted before we pay the contractor. It also means that employer’s NICs will be due on all payments made.
If you engage contractors directly (not via an agency) you will also need to assess their IR35 status. Should you assess their status to be ‘inside IR35’, you will be required to make PAYE deductions from 6 April 2021. There is a direct risk to you that affected contractors could look to bring employment related claims against you. The risk of potential employment claims arising could be reduced by re-engaging these contractors through us as your agency and we would then transition them to become agency PAYE workers before 6 April 2021.
We will work with you to help assess the potential impact of the new rules on you and your contractors and to help you identify how best to respond to these.
We will work with you to ensure your contractor requirements can continue to be fulfilled in the most efficient manner.
Should you assess that your contractor roles are “inside IR35” our internal payroll teams can ensure all payroll requirements are met and payroll taxes accounted for and paid over to HMRC. Should you decide that you require more permanent employees then our permanent placement teams can help you in finding the right people for your business. We can help you to review what options are best for your business in the new world of IR35 in the private sector.