The brand-new Chancellor, Jeremy Hunt, revealed that the off payroll working (IR35) rules introduced from April 2021 (6 April 2017 for the public sector) are to continue unchanged in a reversal of the proposed repeal revealed by the previous Chancellor, Kwasi Kwarteng. On the basis that the guidelines won’t alter, now is a great time to check the level of your compliance with IR35 responsibilities. Particularly as the HMRC ‘light touch’ method to charges for mistakes that were not purposeful ended on 5 April 2022, and HMRC is stepping up its compliance activity. Recap on IR35 responsibilities Under the guidelines presented from 6 April 2021, medium or large-sized organisations in the private and third sectors (leaving out those that are “completely overseas”) have the duty for choosing whether plans with 3rd party intermediaries such as Personal Service Companies (PSC) do in fact represent a disguised work. Where an arrangement is deemed to be ‘inside IR35’ on the basis that it is a disguised employment, then the charge payer is accountable for operating PAYE/NIC on payments, consisting of company NIC, and where applicable the apprenticeship levy. The client utilizing the services of the employee operating through an intermediary such as a PSC is also required to satisfy other responsibilities. For instance, as soon as the customer has used reasonable care and has identified whether the off payroll working rules apply to an engagement, it is needed to communicate that choice in the type of a Status Determination Statement (SDS). It is likewise needed for the customer using the services to provide a status dispute procedure to deal with any disagreements regarding the SDS and react within 45 days. Where the customer is defined as a small company by the Companies Act 2006, duty for assessing the plans, and applying IR35 where necessary, will stay with the workers intermediary such as the PSC. Common concerns and misunderstandings on off payroll working within the social housing sector Now that the IR35 intermediaries guidelines have actually been in place for over 18 months, our tax consultants, RSM, are seeing some repeating problems and misunderstandings within the sector around the guidelines, consisting of: Obligations with regard to PSC versus commitments with regard to self-employed people Whilst work status tests for workers providing services to a customer via their own intermediary such as a PSC are the very same as status tests for self-employed workers who are not operating by means of a PSC, the commitments that you have in relation to each vary and we typically see confusion around this. As above, obligations, and danger, in relation to using PSCs by a medium or large customer apply from 6 April 2021 just, whereas your obligation to determine whether a self-employed employee is truly self-employed for tax functions have actually remained in location for lots of years under different guidelines. Where you are using the services of a PSC, then you are needed to verify your status assessment in a formal SDS and provide a status disagreement process. An does not need to be released when a self-employed person is working for you, although ou needs to still examine whether they are really self-employed, and you need to keep a record of this. If the status of a self-employed employee who is not running by means of a PSC is examined and it is determined that they have the functions of employment, then they need to be treated as an actual worker for both PAYE/NIC and employment rights purposes. Where a PSC employee is determined as ‘inside IR35’ then they are treated as a ‘considered worker’ for PAYE/NIC functions just and do not instantly have staff member status for rights such as pension auto-enrolment. Employment status and the Construction Industry Scheme (CIS) Many housing associations engage with off payroll sub-contractors who are paid by means of the CIS. It is crucial to emphasise that responsibilities in relation to evaluating employment status and IR35 must be undertaken for sub-contractors as they are for any off-payroll worker. It is only when you have actually identified that the off-payroll worker is outdoors IR35/genuinely self used that you can make payments to them under the CIS. In this regard it is often overlooked that each monthly CIS professional return requires a statement to be finished validating that the employment status of each specific included on the CIS return has been considered and it has been validated that they are not in truth a worker or deemed staff member. Obligations where workers are sourced via a recruitment company Just like many other organisations, housing associations often source temporary workers via 3rd parties such as recruitment firms. In this situation payments are made to the recruitment company, however it is very important to acquire verification from the firm on a worker-by-worker basis as to whether or not the employee goes through PAYE/NIC by the agency. If the recruitment firm is contracting with a worker operating through an intermediary such as a PSC and onwardly providing them, then the housing association as the customer (i.e completion user of the employee’s services) has IR35 commitments, unless it is a small organization as specified by the Companies Act 2006. Importantly, the housing association should think about the status of the employee and issue a SDS to both the firm that it contracted with and the employee. Failure to satisfy this obligation can lead to the housing association becoming responsible for any PAYE/NIC due. Due diligence on the labour supply chain is likewise essential because, beyond IR35, there can be other tax and/or reputational threats if the worker is engaged by a celebration in the labour supply chain who is not correctly running PAYE. For example, where the worker is working for a customer in the UK, but is engaged by a party in the labour supply chain based beyond the UK who is not running In summary, for now at least, the off payroll working guidelines are here to stay and HMRC are stepping up their compliance activity following the end of the ‘light touch’ year for penalties. All housing associations need to occasionally evaluate their compliance in the prominent location of employment status. Our tax advisors RSM deal with numerous housing associations and other organisations with regard to their obligations under the off payroll working guidelines and would be pleased to aid with any inquiries. For an initial discussion please connect with David Williams-Richardson. The Chancellor revealed that the off payroll working rules introduced from April 2021 are to continue. Now is a great time to inspect the level of your compliance with IR35 responsibilities.