Samantha Hurley, operations director at APSCo and co-chair of HMRC’s IR35 Forum on what recruiters must get right.

Changing for IR35


The clock is ticking for businesses in the private sector that work with contractors to become fully compliant with the updated off-payroll rules, also known as ‘IR35’. The upcoming changes will require many businesses to adapt, and it is anticipated to be an arduous period, so it’s best not to delay preparations. 

Why action must be taken now

Despite ongoing conversations and warnings to the private sector that IR35 changes are approaching, it seems a surprisingly low number of end clients have taken action. A recent poll conducted by APSCo among its membership revealed that only 12 per cent of respondents believe the majority of their clients have started preparing for the off-payroll changes in the private sector, with almost 40 per cent saying most of their clients are unaware of upcoming changes. 

A shift in responsibility

Following the draft legislation, we now know for sure that fee payers will be liable for incorrect status determinations of PSC contractors. It is, of course, disappointing to see that recruiters will, in most cases, continue to bear the brunt of liability in the supply chain, but it also allows much more possibility for unscrupulous recruiters to offer “outside” determinations, thus disrupting HMRC’s beloved “level playing field”. Yes, end clients could end up with the liability, but they would need at least two businesses in the chain to fail for that to happen, so I think there is still a very real possibility of clients turning a blind eye. We haven’t seen HMRC’s guidance as yet, due in the Autumn, on what a status determination statement should include, however what is clear is that recruiters need to be working with their end clients now to agree a robust process that all parties agree with, not only to make the determination, but to help any relevant information flow up and down the supply chain. At present, the end client ‘complies’ if it provides the determination with reasons to the party contracting with it in the supply chain and the worker – regardless of whether HMRC ultimately agrees. Similarly, the legislation states that ‘reasonable care’ should be taken, but this is not defined.  

The status determination liability flows down the supply chain – each party is the fee payer until they pass the determination down to the next entity in the chain. If a member of the supply chain fails to pass on the determination to the next party in the chain, they will be liable. This also means that as a recruitment company, if you do not receive the determination, you can’t be held liable. However, you should expect to have to provide proof that you haven’t received the document if this is the case. HMRC has decided that liability will sit with the entity which has breached the chain. If HMRC doesn’t receive the payment from the entity that is first liable, they will pass liability to whichever entity has the closest contractual relationship with the client, if they also can’t pay, then the client will be liable. 

Transfer of liability 

There are five situations where the liability will transfer from fee payer to someone else in the chain. These are: Where the client doesn’t take reasonable care; where any entity doesn’t pass down determination; where the client doesn’t comply with the status disagreement process; where the client doesn’t notify a change in its size/status; and where a party further down the chain is unable to pay its liability to HMRC. 


HMRC’s draft legislation has confirmed that small end client businesses will be exempt in the private sector. To qualify as a ‘small business’ companies must meet two of the following requirements: An annual turnover no more than 10.2 million, a balance sheet total no more than 5.1 million or a headcount of no more than 50. A small business has no obligation to tell the next party in the chain that it is small. However, if it becomes medium/large and doesn’t pass down a status determination statement, then the fee payer’s liability will transfer to it. Businesses will stay small or medium/large for the accounting year that the change happens in. So, if they move from small to medium in one of their accounting years, there will be no change in terms of off-payroll working until the following tax year.

Although this information is gathered from the ‘draft’ legislation, it is worth noting the next consultation in the autumn is a technical one – so the detail is extremely unlikely to change. 

With this in mind, we strongly urge recruitment firms to take action now and begin working with their clients to prepare for the new regulations. 

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