In order to understand the impact IR35 has on recruiters, the key thing to recognise is that the recruitment agency is often referred to as the ‘fee payer’ under the new rules. This means they are the entity closest to the contractor in the supply chain, taking responsibility for payment and ultimately, any unpaid National Insurance contributions and PAYE taxes.
So, even though the responsibility of IR35 sits with the end hirer, if you’re a recruiter, there are extra tasks that have come with the new rule changes that you need to be aware of.
RECRUITERS MUST COMMUNICATE SDS’S TO CONTRACTORS
As you provide contractors’ services to end clients, it’s important to ensure you keep the lines of communication open. Contractors need to know the outcome of their IR35 status from the end hirer and how it will affect them. You need to make sure you are clear on the responsibilities of each area of the supply chain and ensure they are being carried out correctly to mitigate any risk further down the line.
SUPPORT END HIRERS ON IR35 CHANGES
Whilst it’s up to the end hirer to make the determination and issue the SDS, the role of ensuring a contractor is paid compliantly falls to the recruiter. This means liaising with end clients and ensuring they understand the legislation and are fulfilling their responsibilities properly. As a recruiter, you must have visibility of the SDS when sourcing candidates for a vacancy, this allows you to engage with contractors correctly and ensure that they are working via the correct option subject to their IR35 status, e.g. Limited, Umbrella or Flex.
WORK WITH CONTRACTORS AND END HIRERS WHEN THE DETERMINATION IS INSIDE IR35
If a role is determined inside IR35, it’s up to you as the fee payer to make the correct PAYE deductions, as getting this wrong my expose you to fines and penalties. This can only be done once an SDS has been received and proper communication has been established with both the contractor and the end client.
REVIEW WORKING PRACTICES
Even though you’re not responsible for making the IR35 determination, as a recruiter you should ensure you’re happy with the assessment that’s been made. This is in the interests of the contractor and to ensure you are not subject to any tax risks.
Showing initiative if an SDS doesn’t seem right and discussing it with the end hirer can be beneficial as a contractor can challenge an SDS and the end hirer has 45 days to respond. By flagging this in advance this could be reviewed before the contractor is involved and is less work for you in the long run.
If you’re a recruiter and need further support, get in touch with Brookson, who are hand to help!