10.5 Top Tips on IR35 changes

ir35

Do’s

  1. Ensure that you have properly reviewed all your workers and established clearly which ones are employees and which are contractors, or contractors working through an agency. You will need a clear list of names to work through to review their status under the new off payroll rules. If you need a checklist/guidelines have a look at our IR35 documents.
  2. Do consider what preparation you need to do and the information you need to communicate to your workers. Consider whether you want to re-negotiate a worker’s terms and conditions if they are now viewed as inside IR35 and you will therefore have increased costs to pay (namely, employer’s NI).
  3. Don’t assume that you know the status of the worker! We recommend using the CEST tool to check their status, as HMRC have said that they will stand by the CEST result (providing the data that was input is accurate!)
  4. Be aware that you will need to take reasonable care in coming to your decision about whether the rules apply and will need to keep detailed records to justify your decision and the reasons for it, so that you can defend any decisions in the event of an investigation by HMRC.
  5. Don’t base your assumptions about the working practices on the contractual arrangements – contractual agreements mean nothing if they don’t reflect reality. Base your decision on the reality of the working relationship, not the one documented in the contract.
  6. Do remember that the CEST tool will only work out a worker’s status for tax purposes and has absolutely no bearing on whether they are likely to be regarded as an employee. The two are completely different distinctions make sure that you (or your managers) know the difference.

 

Don’ts

  1. Ignore this until April 2020! It will take time to review your workers and establish which ones are inside and which are outside IR35, you will need to start the process now to ensure that you have plenty of time to prepare. Don’t underestimate the amount of time this may take!
  2. If you have decided that an employee is inside IR35 and then they raise a dispute with you, saying that they disagree with your decision – do not ignore their dispute. You have just 45 days to review your decision and inform them of your decision following the review, the penalty if you don’t is that you will become liable for paying the worker’s NI and tax (if you aren’t already).
  3. Don’t assume that you already know what the status of your workers is, the CEST test is a very blunt instrument which places undue weight on particular aspects of the relationship – and you may well find that workers you previously assumed were contractors are in fact regarded as disguised employees under the new CEST test.
  4. Forget to review your budgets and the impact this may have on you financially if you have a lot of workers who are inside IR35 and for whom you will now have to pay their tax, NI and employer’s NI.

 

And finally…

10. 5. HMRC are serious about cracking down on what they perceive as non-compliance with the IR35 rules. If you do absolutely nothing the risk is high; you will become responsible for paying the tax and NI contributions of the worker.

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