The brand-new Chancellor, Jeremy Hunt, revealed that the off payroll working (IR35) guidelines introduced from April 2021 (6 April 2017 for the general public sector) are to continue the same in a turnaround of the proposed repeal revealed by the previous Chancellor, Kwasi Kwarteng. On the basis that the rules will not alter, now is a great time to inspect the level of your compliance with IR35 obligations. Particularly as the HMRC 'light touch' approach to charges for errors that were not intentional ended on 5 April 2022, and HMRC is stepping up its compliance activity. Recap on IR35 responsibilities Under the guidelines presented from 6 April 2021, medium or large-sized organisations in the personal and 3rd sectors (omitting those that are "wholly overseas") have the responsibility for deciding whether arrangements with 3rd party intermediaries such as Personal Service Companies (PSC) perform in truth represent a disguised employment. Where a plan is considered to be 'inside IR35' on the basis that it is a disguised employment, then the fee payer is accountable for operating PAYE/NIC on payments, including employer NIC, and where applicable the apprenticeship levy. The client utilizing the services of the worker operating through an intermediary such as a PSC is likewise required to meet other responsibilities. For example, as soon as the customer has actually used reasonable care and has determined whether the off payroll working rules apply to an engagement, it is needed to communicate that choice in the kind of a Status Determination Statement (SDS). It is likewise necessary for the customer using the services to use a status dispute procedure to deal with any disagreements concerning the SDS and respond within 45 days. Where the client is specified as a small company by the Companies Act 2006, responsibility for assessing the plans, and applying IR35 where essential, will stay with the workers intermediary such as the PSC. Common issues and misconceptions on off payroll working within the social housing sector Now that the IR35 intermediaries rules have actually been in location for over 18 months, our tax consultants, RSM, are seeing some repeating issues and misconceptions within the sector around the rules, including: Obligations with regard to PSC versus commitments with regard to self-employed people Whilst employment status tests for employees offering services to a client by means of their own intermediary such as a PSC are the very same as status tests for self-employed workers who are not operating by means of a PSC, the commitments that you have in relation to each vary and we often see confusion around this. As above, commitments, and threat, in relation to making use of PSCs by a medium or large customer use from 6 April 2021 just, whereas your commitment to determine whether a self-employed employee is truly self-employed for tax purposes have been in location for several years under different guidelines. Where you are utilizing the services of a PSC, then you are needed to confirm your status evaluation in an official SDS and provide a status argument process. An official SDS does not need to be issued when a self-employed person is working for you, although ou should still assess whether or not they are genuinely self-employed, and you ought to keep a record of this. If the status of a self-employed employee who is not running by means of a PSC is assessed and it is identified that they have the functions of employment, then they need to be treated as a real staff member for both PAYE/NIC and employment rights purposes. Where a PSC worker is identified as 'within IR35' then they are treated as a 'deemed staff member' for PAYE/NIC functions just and do not instantly have worker status for rights such as pension auto-enrolment. Employment status and the Construction Industry Scheme (CIS) Many housing associations engage with off payroll sub-contractors who are paid via the CIS. It is very important to stress that obligations in relation to evaluating employment status and IR35 need to be undertaken for sub-contractors as they are for any off-payroll worker. It is only once you have identified that the off-payroll employee is outside IR35/genuinely self used that you can make payments to them under the CIS. In this respect it is often neglected that each regular monthly CIS contractor return needs a declaration to be finished confirming that the employment status of each specific included on the CIS return has been considered and it has been confirmed that they are not in truth an employee or considered worker. Obligations where employees are sourced by means of a recruitment company Similar to lots of other organisations, housing associations frequently source short-term workers by means of 3rd parties such as recruitment firms. In this circumstance payments are made to the recruitment company, however it is very important to get verification from the company on a worker-by-worker basis regarding whether or not the employee is subject to PAYE/NIC by the firm. If the recruitment company is contracting with an employee operating through an intermediary such as a PSC and onwardly supplying them, then the housing association as the client (i.e the end user of the employee's services) has IR35 commitments, unless it is a small company as specified by the Companies Act 2006. Importantly, the housing association must consider the status of the worker and release a SDS to both the firm that it contracted with and the employee. Failure to meet this obligation can result in the housing association becoming accountable for any PAYE/NIC due. Due diligence on the labour supply chain is also essential because, outside of IR35, there can be other tax and/or reputational threats if the worker is engaged by a party in the labour supply chain who is not correctly operating PAYE. For example, where the worker is working for a client in the UK, however is engaged by a celebration in the labour supply chain based beyond the UK who is not running In summary, for now a minimum of, the off payroll working guidelines are here to remain and HMRC are stepping up their compliance activity following completion of the 'light touch' year for penalties. All housing associations ought to occasionally examine their compliance in the high-profile area of work status. Our tax consultants RSM work with lots of housing associations and other organisations with regard to their responsibilities under the off payroll working guidelines and would be pleased to aid with any questions. For an initial conversation please connect with David Williams-Richardson. The that the off payroll working rules presented from April 2021 are to continue. Now is a good time to examine the level of your compliance with IR35 responsibilities.
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