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IR35: How to ensure compliance throughout your workforce

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This is a guest contribution by REC business partner Brookson Legal.

As we approach the delayed deadline of IR35 in the Private Sector, many organisations will be focussed on ensuring that their contingent workforce has been engaged compliantly, has obtained a status determination statement and has shown reasonable care to arrive at their decision on whether a contractor is inside or outside of IR35.

What are the hirer's responsibilities?

While it is essential for employers to ensure that they are prepared for the change in legislation ahead of April 2021, it is also important to recognise that arriving at an IR35 determination and demonstrating reasonable care is only the beginning of this journey. Ongoing attention must be paid to ensure that contingent workers are engaged and paid compliantly.

Under the new legislation, the responsibility to determine the IR35 status of a worker sits with the hiring organisation. However, the responsibility of ensuring that the workers are paid compliantly and in line with the IR35 status resides with the Fee Payer.

What are the Fee Payer's responsibilities?

The Fee Payer is the entity which sits closest to the worker in the supply chain and is responsible for payment, in many cases this will be the recruitment agency which has found and placed the worker. The Fee Payer is therefore liable for any unpaid National Insurance contributions and PAYE taxes if a worker is found to not be engaged and paid compliantly.

Where the Fee Payer failed to deduct the correct tax and is subsequently unable to pay these to HMRC, the responsibility to do so will be transferred back to the end hiring organisation. It is therefore critical that employers have full visibility of their contingent workforce throughout the process to not only ensure that a status determination statement has been produced but also to ensure that the recruitment agencies, umbrella companies and outsourced payroll providers are providing payment methods which are aligned to the IR35 status of a role. Losing visibility of worker engagements and payments poses a risk to employers if the processes are not being proactively managed and reviewed on an ongoing basis.

It is also important for recruitment agencies to have visibility of the status determination statement at the point a vacancy or requirement is published by the end hiring organisation to ensure they have all the required information to hand and can engage contingent workers correctly.

How can Brookson help?

At Brookson we provide the required technology and services from end-to-end, from the initial IR35 reviews through to payroll. Our Contingent Workforce System provides full visibility of all contingent workers to end hiring organisations and agencies from the point a vacancy is published with a status determination statement through to the submission and selection of candidates and then to payroll. This ensures all workers are engaged and paid compliantly via one centralised system. No one is better positioned to provide this end-to-end service which is underpinned by a regulated law firm specialising in IR35 and industry-leading technology and MI capabilities.

Don’t just plan for the beginning of your journey, ensure that you are prepared for the changes ahead of April 2021 and beyond making these processes part of your business as usual.

If you feel your business could do with further support regarding IR35 both pre-and post-April 2021 get in touch with Brookson.

This article was originally published by Brookson Legal

Need more IR35 support?

Find all the latest legal resources and business advice you need to prepare for this tax legislation on our IR35 hub.