On 6th February, End Clients will have just two months left to prepare for IR35. Whilst most organisations are now well on their way to finalising their IR35 processes, we look at what they’ll need to consider.
Considering the future impact of a blanket ban
Knowing that IR35 is a complex piece of legislation, some organisations may consider a blanket ban to cease working with Personal Service Companies (PSC), opting instead to engage off-payroll workers through PAYE or Umbrella solutions.
This approach however, whilst providing a simplistic solution to IR35, does not provide the client with an opportunity to demonstrate their commitment to compliance, or care for their wider contractor workforce. Taking reasonable measures to ensure the legislation is fully understood and stakeholders across the organisation can make accurate determinations, provides an opportunity for End Clients to demonstrate their company values.
In a recent conversation Ann Swain, CEO of the Association of Professional Staffing Companies (APSCo) called on organisations to consider the future impact this decision could have on their business,
“While there’s understandably a compliance concern for employers engaging contract professionals, we simply can’t overlook the fact that these individuals have chosen this working option.”
She advises organisations to consider how this approach could impact on the future availability of temporary workers to support projects - if businesses limit the contractor workforce available to them through a blanket ban.
Ensuring reasonable care when making Status Determination Statements
Whether organisations plan to make Hiring Managers solely responsible for making Status Determination Statements (SDS), or request that they work in partnership with a central IR35 evaluation team – HMRC will be looking to ensure reasonable care is being taken.
If challenged, organisations will need to be able to demonstrate this reasonable care, which HMRC have said they expect to see from the organisation and not just the individuals making the statements. This means it’s crucial that formal training programmes are delivered, which can be evidenced if needed to show that the organisation has gone to great lengths to ensure its workforce is able to make accurate determinations.
Passing down the Status Determination Statement
Once the SDS has been completed, it’s important that it is passed down to all parties in the engagement chain, as well as the individual contractor. In fact, each party in the chain holds the responsibility for tax and NICs until they have formally passed it down to the next party in the chain.
For example, where a Managed Service Provider (MSP) manages a central recruitment service for an organisation, the chain of responsibility may be as follows:
The End Client must pass the SDS directly to the worker, and to the MSP
The MSP must pass the SDS to the agency they have used to engage the worker
As the Agency is the final party in this chain who deals directly with the PSC then no further action is required – although they may also wish to pass the SDS down to the worker to record this for their own auditing and compliance
Source: “Engaging contingent workers ahead of IR35 and beyond”, The HR Director, 11/01/2021