Risk of ignoring the legislation or getting it wrong
The new rules will have a significant impact on contractors working through a Personal Service Company (PSC), Recruitment Agencies, all large and medium-sized end-clients in the private sector and all organisations in the public sector. Operating PSCs (private sector companies) will remain responsible for assessing the IR35 status of their assignments once the new rules get implemented.
Businesses who are not compliant by the deadline, run the risk of financial, operational and reputational issues and failure to comply could leave your business open to extra expense and exposed to risk.
Your legal obligations from the 6th April 2021:
As the hirer, you will be responsible for determining whether a contractor is 'inside' or 'outside' IR35 and producing a Status Determination Statement which you will need to share with the "fee payer" or company responsible for paying the contractor. Incorrect assessments could lead to potential tax/ National insurance losses. Companies that act in good time will minimise risks and gain a lot, by way of opportunities.
- Producing a Status Determination Statement (SDS) WARNING - Duty of Care means that you should avoid producing blanket assessment for your contractor population (i.e all inside or all outside IR35)
- Communicating the outcome of SDS to the Intermediary or organisation providing you with the contractor
- If you engage the contractor directly and you determine that they fall inside IR35 you will be responsible for making the necessary tax deductions and paying HMRC
- Carrying out new SDS each time a change is made to the assignment.
While businesses may perceive a respite from the new rules, all parties involved in a labour supply chain will need to ensure they remain IR35 compliant. The changes to the new rules will create significant cost and compliance challenges for businesses which rely heavily on a flexible workforce. This means that you will need to have visibility of all your non-permanent workers and understand the nature of their engagement.
If your assignment is determined to be inside IR35 then you can engage in the following options:
Otherwise, you will have to
- Carry out Status Determination for all self-employed workers engaged via an intermediary such as a PSC and assess if workers fall or not
- Decide where your workers fall within IR35 and invoice you directly via their PSC – you will be responsible for making the necessary tax deductions and pay HMRC.
- Share all SDS information with all parties in the labour supply chain
- Avoid issuing any blanket determination for any role.