how will the IR35 legislation affect your business?
Currently, contractors engaged via their own personal service company have the responsibility of determining their own IR35 employment status, and the end hirers have no liability. Whereas, from April 2021, you as hirers will be held liable for making the correct employment status decision for your contractors ensuring all contractors in your supply chain are paying the appropriate taxes.
Many of your contractors may be engaged by agencies or other intermediaries in your supply chain but if anything was to go wrong ie tax deductions have not been made correctly, the risk comes back to you as
1. agency/intermediaries not engaging worker appropriately
If the agency or other intermediary does not engage the worker appropriately then the HMRC financial tax risk can ultimately fall back on you the hirer.
For example if you the hirer decide that an assignment is caught by IR35 and the intermediary pays that workers limited company gross then you can become liable for the tax and national insurance that should have been deducted and paid to HMRC together with interest and penalties.
Understanding how every worker is engaged and paid in your supply chain will eliminate risk.
2. financial standing of intermediaries
If any of the companies in your supply chain do not pay any of the tax due or the correct amount with accurate deductions where necessary, HMRC will come after them in the first instance. However, as we’ve said the financial and reputational risk ultimately lies with you so they will also approach you too. With that in mind, you may want to assess the financial standing of those in your supply chain so you can mitigate this risk as much as possible.
In line with the above information if you have a made a status determination for one of your workers and they are being paid via an intermediary, it’s your responsibility to ensure these payments are correct and in line with the off-payroll working rules. Not only are you accountable for passing the employment status’ down the supply chain but you may wish to complete regular audits to ensure this compliance continues.
4. credibility of supply chain
You may also want to check how long the intermediary has been in business, whether they are highly leveraged and whether the directors or owners have any negative history with HMRC.
According to a report, only 47% of hirers claimed to know the percentage of their workers that fall inside IR35. We understand that recognizing and dealing with all these risks may be daunting. From training, communications, doing IR35 assessments, putting new processes in place, ensuring workers are engaged correctly and with credible intermediaries etc is all time consuming when you have a business to run. This is where giant steps in; with 30 years of independent specialist workforce management experience, we can take care of everything related to off-payroll working for your company.