PREPARING FOR IR35 REFORM

IF YOU ARE A RECRUITMENT AGENCY/RECRUITER

With the public sector rules having been implemented a year previous, private sector engagers are in a much better position, with a finalised Check Employment Status for Tax tool (CEST) and the experience of IR35 professionals like Qdos Contractor.

As an agency/recruiter, there are several steps that need to be followed in order to ensure you are compliant with the changes, including:

• • Liaising with End Clients– You need to liaise with end clients with whom your contractors will be placed. This creates a clear form of communication to ensure the correct steps are followed with each individual contract.
  • Review Administration Processes for Payroll– The fee-payer is responsible for administering payroll for contractors, meaning you may have to deduct the relevant tax and NICs based upon each individual contract and its determination (of being inside or outside IR35). It is important to consider existing processes and systems as early as possible to ensure you are equipped with the appropriate tools.
  • Maintain Reporting– It is crucial to keep a record of payments that are made to contractors, and will need to be reported to HMRC using a Full Payment Submission, similar to that of PAYE workers and keeping a recording of deductions on a deductions working sheet.
  • Insure Your Risk –  Qdos insures the liability of each outside IR35 determination made via the Status Review assessment portal, protecting you and your clients in the event of HMRC compliance activity.

Although it may seem straightforward, most agencies are not equipped to set up contractors onto a payroll and are not able to make the necessary deductions, which therefore adds a wealth of administration required in liaising between contractors and end clients to determine the status of each engagement.

Contractors run their own businesses and are used to having control over their tax affairs, so keeping your contractors informed with good communication channels will help the process for everyone involved.

IF YOU ARE THE END USER/PRIVATE SECTOR BUSINESS

As a medium or large sized end-client business who is engaging the contractors, it is crucial to be fully aware of the changes to communicate effectively and consider:

• Determining the Status of Off-Payroll Workers – As of 6th April 2021, the end client is responsible for determining the IR35 status of the workers whom they are engaging. It is down to the end client to carry out this process and take steps accordingly in liaising with all parties involved to communicate any decisions made. It can be a complex procedure, and there are a number of services to consider, including HMRC’s CEST tool and Qdos’ ‘Status Review’ system tool to help determine the IR35 status.
• Liaise with PSC Workforce to Ensure No Walkouts – It is key to ensure that those who are operating through their own Personal Service Companies (PSCs) are liaised with and are aware of the changes. Consistent and relevant dialogue is crucial to ensure there are no walkouts and both parties involved are fully aware of the decisions that are made, and how they will be made.
• Train Relevant Internal Resource on IR35 – In order to effectively determine each status correctly, it is important for the relevant resources to be trained on IR35, so that they are capable of following the rules. Each engagement should be reviewed on its own merit and making ‘blanket’ decisions should be avoided. Whilst there may be similarities in delivery of services within certain groups of workers, there should still be a considered assessment undertaken.
• Inform Agencies of Decisions– Any determination that is made on a contract needs to be communicated to the agencies, as they are usually the fee-payer; should it be determined that the worker is operating within IR35, the agency will then be required to deduct the correct PAYE and NICs as though the worker were an employee.

AUDITS

The IR35 Audit is designed to advise you on the impact of the changes to ‘Off-Payroll Working in the Private Sector’ within your organisation and will review various aspects of your business.

Undertaking this work will provide you with detailed information to support discussions within your business when considering your ongoing compliance management strategy, and to present practical solutions to your clients.

We will assess your contractor business processes as well as the employment status of your off-payroll workers, providing expert advice in the format of an audit report and based on our years’ of experience defending IR35 enquiries. The report will include recommendations to ensure that your business can continue to operate successfully now the change in legislation has been implemented.

COMPLIANCE MANAGEMENT

The off-payroll working rules require cooperation between recruitment agencies and end users in determining and applying IR35 status. For both parties, IR35 status is likely to be a new concept and businesses may not have the suitable resources in place for dealing with reform.

For UK businesses with direct engagements, the rules can be daunting and disgruntled contractors can pause projects, as was experienced in the public sector.

The Qdos Status Review is a compliance management system and contractor testing service with a difference, which can be used for both agency-end user arrangements, and for direct engagements:

• Assessments are made by IR35 experts with nearly 20 years’ experience in the field
• Includes communication channels between contractor, agency, and client
• Ensures compliance with the rules for each party in the chain
• Tax liability insurance is available to cover the risk for the relevant party

The Status Review system reduces the risk of incorrect determinations and involves the contractor in the decision-making process, fundamental in reducing walkouts and disagreements in status decisions, whilst still maintaining the control and approval requirements for the end user.

Recruitment agencies are kept informed of the progress of assessments and ultimately informed of results via the system.