New obligations in the private sector
The legislation dictates that there will be an obligation on the end-hirer to ensure they are using reasonable care when undertaking their IR35 assessments. There is a level of ambiguity in what will constitute as reasonable care, this will be determined on a case-by-case basis considering the end-hirer’s means and resources. In order to assess the status of a contractor, an end-hirer needs to ensure they have analysed the working practices and reviewed the contractual terms and conditions of the engagement. The requirement of reasonable care is ongoing, and end-hirers should regularly review their workforce to ensure assessments remain correct and up to date.
Additionally, the end-hirer will also be required to provide a status determination statement detailing whether a contractor is inside or outside of IR35, coupled with the rationale for their conclusion. An end-hirer must provide this to the contractor and the fee payer in the supply chain. Consequently, the fee payer (usually the end-hirer or recruitment business in the supply chain responsible for paying invoices) must follow the determination and ensure the appropriate amount of tax and national insurance contributions are deducted. If the end-hirer fails to pass the status determination statement down to the next entity in the supply chain, the end-hirer will assume fee payer responsibilities.
End-hirers must also ensure that there is a process in place which allows their contractors or a fee payer to dispute their determination. From 6th April 2021, once a contractor challenges their status determination statement, the end-hirer will have 45 days to formulate a response. If the end-hirer is of the view that the original conclusion was correct, the original status determination can be upheld. If the end-hirer finds that the initial conclusion was incorrect, it must issue a new status determination to both the worker and the fee payer.
New obligations in the public sector
As mentioned above, public sector organisations have been responsible for determining contractors’ IR35 statuses since 2017. However, from April 2021, public sector organisations must now demonstrate reasonable care when assessing IR35 statuses and produce a status determination statement to detail the outcome of the assessment. Similarly, to the private sector, the status determination statements must also be provided to the contractor and fee payer and a challenge process should be in place.
How can Brookson Legal help?
Brookson Legal Services can help businesses assess their workforce, advise on determinations, alongside producing status determination statements, facilitating a challenge process and ensuring the end-hirer passes the threshold of reasonable care. Get in touch today to see how we can help you.
This article was originally published by Brookson Legal.