Skip to main content

IR35 off-payroll working legislation : how do you achieve compliance?

on Tue, 17/11/2020 – 09:13
achieving compliance under IR35

how will the IR35 affect your business?

From April 2021, contractors and hirers in the private sector need to be ready for the introduction of new IR35 rules via the off-payroll working legislation. You might be confused whether the rules directly apply to you or not, but there will be a shift in responsibility in respect of the IR35 legislation. From April the financial and reputational risk lies with you as hirers for determining the employment status of all your contractors who are engaged via their own limited company. At giant, we have simplified the process into five simple steps to assist you.

step 1: assess impact to your business

It is important for you as a business to understand whether you are in scope of this legislation. Small businesses having 2 of the following 3 factors are exempt from the legislation: 50 or less employees; a balance sheet total of less than £5.1 million; turnover of £10.2 million or less. As hirers you need to carefully assess and determine where your business lies. If you are in scope, your first step is to look at your existing workforce to assess the scale of your financial risk. Along with that, once you have determined the scope, you also need to ensure that the assessment for each assignment is carried out with reasonable care. Right employment decisions are critical to the sustainability of your business.

step 2: what’s your approach?

Some hirers may be considering making blanket assessments. According to a survey, 59% of UK businesses were considering making blanket assessments as they do not have time to assess assignments on individual basis. For blanket ‘inside IR35’ decisions HMRC will not pursue you because they are collecting the additional tax they feel they are currently losing but for ‘outside IR35’ decisions it is riskier than it generally seems. Making blanket ‘outside IR35’ assessments may seem like a cost-efficient option, but in case HMRC investigates your contracts, the loss incurred by your organization would be way more than one might have forecast.

This is where giant comes in. We offer assistance and support to your business. Our experts would help you in assessing assignments individually as the working practices of one assignment may vary from the next. By doing individual assessments, you as hirers are minimizing the risk that lies with you, both financial and reputational.

step 3: assessment options?

A lot of you might be thinking; is HMRC’s CEST tool the only option I have to assess a contractor’s employment status? Or is there an alternative? The truth is that companies like yours can choose between the CEST tool and an independent assessment tool. At giant, we provide you with both options. You can choose or mix and match. HMRC say they will not challenge a decision made by their CEST tool which very much lowers your risk where the decision is ‘outside IR35’ whilst independent assessments often have the benefit of an insurance policy as an add on. We can manage the assessment process and guide you on how to take these assessments in order to get the decision right and valid.

step 4: project management

As a corporate company you rarely have time to go through the employment status checks and give appropriate training to the internal staff about off-payroll working. The off-payroll working is a new concept for a lot of companies and the risk attached to it may bring a lot of uncertainties to you. This is where an intermediary like giant steps in. Outsourcing to giant can provide you with a complete support program for everything you need related to IR35. We will take care of everything related to IR35 and ensure compliance. Starting from the contractor audit, internal training, communications to staff and contractors, assessing the employment status of your contractors, providing a detailed report and summary together with payment options for contractors post April, whilst always making you aware of any risks inherent in your decision making - at giant we have got it all covered!

step 5: April 2021 and beyond

The time is now to prepare. You need to get prepared for the changes it brings and adapt to those changes before April 2021. Careful assessments with reasonable care should be carried out for individual assignments. Ongoing reviews of your contractor population, processes, contracts and working practices are suggested in the long-run.

Moreover, the process is crucial for a company like yours as there might be some contractors you have been affiliated with for a long time. 41% of businesses avoid making assessments because of the fear of losing their contractors in case of wrong judgement. But as they say, do not let fear of change hinder your success.