HMRC provides a means to help companies determine whether their contractor workers are caught by IR35 – the Check Employment Status for Tax (CEST) tool. However, there has been much controversy over the CEST tool’s accuracy and gauging by some of the recent decisions seen at the UK’s Tax Tribunals, it would suggest that some may not be 100% effective at determining the correct status in every scenario, which is why additional professional assistance could prove pivotal. This is where ������Ƶ can assist with the evidence gathering and classification of the required detail. We have a status determination solution that our life science partners can rely on, we have teamed up with the UK's leading IR35 tax experts to provide a solution that combines the best technology with unrivalled support. 

REVIEW CONTRACTS AND TERMS OF BUSINESS

This is a key element of deciding whether IR35 should be applied. This defines the individual’s independence from the business and whether they are free to pursue other work outside of the company, which is valuable if you’re seeking an outside determination. In essence, this dictates the element of control that a business or recruitment agency has over the Contractor.

Where it is clearly evident that they can apply whatever control required, such as the specific hours worked or the location of work, then HMRC could assume that despite being seemingly self-employed via their own private service company (PSC), they are in fact an employee of the business, whether temporary or not.

Many of these elements of control are often stipulated under a work contract and this document could, therefore, determine whether the off-payroll rules apply. Should you wish to maintain a similar relationship with a contractor, it may be worth reviewing their existing contract, roles and responsibilities to ensure that they are sufficiently distanced from the business so as to be truly self-employed.

CALCULATE THE COSTS

If everything remains the same, the initial perception is that many workers will likely fall in-scope of the IR35 rules. Businesses need to take the time to consider the true cost to their business. A review of the costs, in particular the employer’s National Insurance Contributions (ERNICs), may reveal that it is no longer economically viable to have as many contractors or consultants working under the new rules.

This is where a pragmatic approach could allow your business to effectively land grab the best talent as there will be a number of businesses who will not appreciate the benefits of changing their working practices to allow for contractors to work in a compliant fashion.

Taking a pragmatic approach could allow your business to effectively land grab the best talent

PROTECT THE TRULY SELF-EMPLOYED

HMRC has gone to great lengths to make it very clear that IR35 is not intended to target people who are truly self-employed. There has been anecdotal evidence from many of those caught out by the new rules in the public sector who had previously considered themselves to be self-employed.

This evidence suggests that some large employers have taken a blanket agreement to include all contractors under the rules to avoid a penalty or reputational damage. Unfortunately, for some contractors, this means that they have been unfairly included within the scope of IR35.

Employers should take a cautious approach when applying the rules and take time to identify each person’s status on an individual basis. Applying the rules inappropriately could lead to conflict with key members of staff and has the potential to lead to litigation against a company if a worker feels their new status means that they are unable to work for the business in future.

IMPLEMENT NEW RECRUITMENT PROCEDURES

Consider your position regarding the recruitment of new workers. By being clear from the outset, those applying for a role should be able to appreciate whether or not they are likely to be bound by the IR35 rules and you as an employer can ensure that their payroll is conducted properly from day one. It would be worthwhile that new adverts and those of agency’s that support you make it clear whether the role is for a set contracted period of work and to be conducted by a self-employed individual.

If you begin conducting the necessary checks and putting the correct procedures in place now most employers should be able to avoid any potential liabilities. Also, this will ensure that the contractors that they work with are fully aware of how the change will affect them.

In HMRC’s guidance it is made clear that “the people making the decision should be trained, suitably qualified and understand the rules”

Businesses must not underestimate the impact of IR35 and must begin taking steps now to ensure they are ready to apply the rules from April. Good communication with your contractors and your managers regarding these changes is an important element of conducting all the changes.

In HMRC’s guidance it is made clear that “the people making the decision should be trained, suitably qualified and understand the rules”. They will also need to consider all the facts and speak with both internal and external partners and most importantly, the contractors.

Here at ������Ƶ we offer a service that will help you demonstrate the use “reasonable care” by correlating all the available data into a pack. Our expertise in interviewing, auditing employment agreements, the understanding of the working practices of both parties with the knowledge around the proposed legislation will provide extremely advantageous. We are able to utilise our specialist skills and expertise in advising both businesses and individuals in relation to the new rules and the steps they need to be taking. To find out more please email our team at IR35@proclinical.com.