Do you engage contractors in the security, international development or extractives industries in the UK or send them abroad? Does your company have a connection to the UK? Are you a contractor based in the UK? Then our 4-week blog series is a must-read around this rapidly approaching enforcement of the legislation that will impact you and your business.
Our 4-week blog series will cover:
1. What is IR35 and its Impacts?
3. How to assess roles for IR35?
4. What are my IR35 Options?
This week in, “How to assess roles for IR35” we cover reasonable care, what is necessary to determine roles, and the technology to assess.
How to prove Reasonable Care?
The most important IR35 change is that it becomes the responsibility of the End Client to determine roles moving forward, not the contractor. The End Client must show reasonable care in the process, which is key in case of an HMRC investigation.
To prove, “reasonable care” you must understand your working practices and processes, particularly around, “Control”, “Part and Parcel” and, “Substitution”. Do you control your contractor population in terms of location, hours worked, equipment etc? Do you allow, “Substitution” and if yes, can you evidence it having ever occurred?
You must assess each, “role” (not an individual) as to whether IR35 applies and assess each role fairly and accurately. The legislation applies to payments from April 6th, 2021, so you must assess your incumbent population, if they will be paid after 6th April. You may look to have an IR35 cut-off date, linked to an invoice payment date, in March 2021.
Download, retain and save determinations, known as Status Determination Statement (SDS). You are legally obliged to share the SDS with the supply chain (if there is one) and the contractor, who has the right to appeal your determination. You must reply within 45 days of receiving the appeal.
If “outside IR35” determinations are being made through HMRC’s CEST tool, perhaps consider a third-party assessment, see Technology below, to verify the findings. Consider enforcing insurance products that will insure you and the supply chain/contractor, such as Kingsbridge IR35 Protect, referenced in last week’s blog (need link here to blog 2)
What are the Key Tests to determine roles?
HMRC believes there are four key tests to determining roles, however, it is prudent to consider additional areas, which are listed below:
HMRC’s four key tests:
• Mutuality of Obligation (MOO)
Can the contractor, as the worker, accept and reject work? As a contractor, can they decline an assignment or a piece of work. If mutuality of obligation exists, they could fall outside of IR35. Please note, MOO does not appear in any HMRC online determination
• Substitution
Does the role, and most importantly, the End Client, allow for the contractor to substitute themselves, at their own cost? For example, if the contractor is taking time off, can they send someone in their place, at their own cost? There is a misconception that if Substitution is permitted, and can be evidenced, then this is the overriding factor in being, “outside” of IR35. This is not the case, “Control” is more important!
• Control
Does the End Client control the contractor from a work perspective? Do they dictate the working hours and location of work, provide equipment, see below, to complete the assignment? If the contractor is, “controlled” then this is the main factor in coming to an, “inside” determination.
• Part and Parcel
If contractors are embedded in the company structure and treated like employees, forming “part and parcel” of the company organisation, this again will point to an, “inside” determination.
Additional areas to consider:
• Tenure
As stated in last week’s blog, it is important to understand how long a contractor has been on assignment with your organisation. Is it over 2 years, is it with the same supervisor, is it the same assignment? Contractors should not be on a contract longer than 24 months, and continuous deployment on the same assignment could be a pointer to, “part and parcel”
• Equipment and Technology
Are they using company equipment such as uniforms, body armour and firearms? Do they use company technology and hardware, laptops, mobiles, GPS devices? HRMC will again see these as indicators of, “control” and, “part and parcel”
IR35 Assessment Technology
HMRC has built its own tool, the Check Employment Status for Tax (CEST), however, it has been widely criticised, not least by the House of Lords, in their IR35 review. There is no legal obligation to use CEST, though it is free to use, and is the only tool HMRC has stated it will stand behind.
There is a myriad of tools available, including by some of the big 4 accounting firms, such as EY and Grant Thornton. Each tool will take around 15 to 20 minutes to complete an assessment. All non- HMRC tools will come with costs, but some of the market leading tools are:
- Kingsbridge IR35.io: Kingsbridge is a leading insurance provider and offers the IR35.io assessment (and associated IR35 insurance products)
- QDOS: QDOS is another leading insurance provider and offers the IR35 contract assessment (and associated IR35 insurance products)
- IR35 Shield: Provided by Contractor Calculator, IR35 Shield has been providing assessments for several years.
- PayStream: A leading Umbrella organisation, PayStream offer their IR35 Comply review
WHERE CAN I FIND OUT MORE?
Feel free to enter questions in the comments section below and look out for our fourth blog on the 28th September, “What are my IR35 Options?”. We will also be holding a QnA session which you can sign up to here.
Additionally, contact us at Proelium Law on [email protected], or visit our website at https://proeliumlaw.com/
About HiverPath
HiverPath is a boutique consultancy focused on the Staffing Industry. With over 20 years’ experience in the industry, covering the UK, Europe and Global markets, HiverPath can assist in multiple areas:
- Regulatory Compliance
- Workforce Strategy and Planning
- Technology
- Implementation and Project Management
- Change Management
- Market Analysis
- Cost Efficiencies and Business Analysis
- Diversity and Inclusion
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