This is a question I get asked regularly and the answer depends on the size and spread of your business and the contractors you engage with currently. If you have multiple sites, line managers and recruitment partners then the process for assessing IR35 is going to take you longer.
However, in my experience of the Public Sector changes (2017) and the delayed Private Sector changes (2020), I do believe there are some simple questions to ask yourself and rules you should be applying:
ASSESS WHAT HAVE YOU DONE PREVIOUSLY AND PRIOR TO THE DELAYED LEGISLATION CHANGE, ALSO CONSIDER THE FOLLOWING:
- Was your process robust?
- Were you happy with your chosen provider?
- Do you need to consult expert advice for an IR35 solution?
- Did you get advice on how to change working practices and contracts or just input information into an online tool?
- How are you going to deal with contractors that challenge your IR35 decision/ SDS outcome?
- Identify if you are the ‘Client’, ‘Fee Payer’ or both? A lot of businesses are confused by this.
CENTRALISE THE INFORMATION ON YOUR CONTRACTORS, LOCATIONS, HIRING MANAGERS AND RECRUITMENT PARTNER, AGAIN CONSIDERING:
- Do you have a centrally managed recruitment process or authorisation process?
- Do you have a record of all contractors you are engaged with?
- Ensure you have all contracts centrally logged ready for review.
FORM AN IR35 PROJECT TEAM THAT CAN ENSURE YOU CONSIDER ALL PROCESSES FOR IR35, ENGAGEMENT METHODS AND HAVE A SPREAD ACROSS THE BUSINESS, THIS MAY INCLUDE MEMBERS FROM:
- HR/ Staffing/ Internal Recruitment
- Tax/ Compliance/ Legal
ASSESS THE MARKET OFFERINGS FOR A SUPPLIER WHO CAN ASSIST YOU WITH YOUR IR35 REVIEWS, UNLESS YOU HAVE A LARGE LEGAL/COMPLIANCE TEAM, IT IS UNLIKELY YOU CAN DO THIS IN-HOUSE:
- Does your chosen partner have minimum experience of 5+ years specialising in IR35 reviews and audits?
- Does the SDS they produce list the reasons for the decision? A simple inside/ outside determination will increase the challenges you receive from contractors.
- Is IR35 their specialism or something they have chosen to do recently?
- Do they have professional indemnity insurance for the advice they give to you? All professional advisors should carry this as standard.
- Are they classed as a ‘professional advisor’ and do they have the relevant accreditations?
- HMRC state in their Employment Status Manual (ESM 10014) that engaging with a professional advisor constitutes you have taken ‘Reasonable Care’.Are they classed as a ‘professional advisor’ and do they have the relevant accreditations?
START THE PROCESS AS EARLY AS POSSIBLE WHICH WILL ALLOW YOU TIME TO CONSIDER THE BELOW:
- What changes can be made to contracts and working practices to legitimately maximise the number of outside IR35 determinations?
- Decide how this will affect your projects and recruitment process moving forward – for example, being late to assess could result in difficulty in hiring the best talent and the loss of existing talent.
- Look to distribute your SDS’s by early March to allow contractors time to challenge and ensure you have the correct contracts and payment processes in place.
DO YOU HAVE THE CORRECT PAYMENT PROCESSES IN PLACE FOR CONTRACTORS WHO ARE DEEMED INSIDE OF IR35 AND HOW WILL YOU PAY THE CONTRACTORS? THIS IS SOMETHING A LOT OF BUSINESS DON’T CONSIDER.
- Your own PAYE or temporary payroll
- Can you cope with this extra work and administration?
- Can your agency facilitate PAYE payments?
- Can your finance systems calculate and make a deemed payment to a limited company?
- Are you going to engage with an Umbrella solution? If so:
- You need to complete checks for compliance.
- You are at risk of the Criminal Finance Act if you chose a Tax Evasion scheme
- What can you do to ensure your contractors use a compliant UK umbrella company?
Lastly, you need to consider what happens after April 6th and how you are going to make IR35 part of your business-as-usual process. As well as continuing to be able to retain and attract the best talent in the market.
The 6th April is the implementation date for the legislation, but it is not a one-off exercise, you need to continue to demonstrate ‘reasonable care’ and be able to assess new roles and vacancies post-April, in order to be able to recruit for new roles.
Brookson Legal Services is an SRA regulated law firm that has specialised in IR35 since its inception in 2000 and has over 20 years of history and experience of providing expert advice. If you would like a free consultation on any of the above processes, then please get in touch.