IR35 off payroll working reform – education is key

As we edge closer to April 2021, when the private sector will be hit with new IR35 legislation, it is time for firms to dust off their plans from earlier this year when the original implementation date was April 2020.

The change pushes responsibilities for contractor assessments and deduction of tax up the contractual chain.

Businesses should make sure they have robust procedures in place to deal with the new rules and the additional requirements IR35 legislation brings.

They should also make sure their internal teams are given the appropriate training to apply the new legislation going forward.

Over the summer a vast number of businesses scaled back on contractors and employees as a result of the impact Covid-19 had on operations.

But we are now starting to see firms pick up again, with some choosing to engage with contractors rather than take on the obligations of employees.

While this may seem like an easy option now, it might not be the case early next year when April 2021 rolls in.

There are still questions in the market about what to do, how it is done and who does it.

There are also a number of vital points businesses should consider and act on before the end of 2020.

First, review your working practices and arrangements – has the pandemic had an impact on them and blurred the

line between employees and contractors?

Also, assess current supply chains to identify responsibilities – can the end user be identified and do they have the relevant information to complete your contractor assessments?

Take time to refresh

your internal team’s knowledge of the changes – having a team that can accurately and efficiently apply the new rules is the key to success.

Formalise and action the plans for completing assessments. The HMRC Check Employment Status for Tax (CEST) tool often returns inconclusive results, so a back-up must be in place for businesses using it.

In cases where you are the fee payer, rollout plans for processing contractor payments under IR35 to ensure the relevant liabilities are paid to HMRC on time.

Contractors tend to have 30-day payment periods, however, this may need to change to work for payroll.

Finally, assess your business risk under the Corporate Criminal Offence (COO) legislation – are you comfortable that your staff who are dealing with IR35 understand the connection and risk, or, is there a training requirement to support the work required?

While training and development may not jump out as a key action point for the implementation of this legislation, it is key for the success and compliance of all business sizes and types, including where elements of IR35 obligations are outsourced.

Anderson Anderson & Brown’s dedicated team can help identify and implement bespoke IR35 plans, and assist in the delivery of training to staff on the new legislation and its impact across all sizes and types of businesses.

Steven Fraser is a partner and head of payroll and employment taxes at accountancy and business advice firm Anderson Anderson & Brown

REMEMBER: The HMRC Check Employment Status for Tax (CEST) tool often returns inconclusive results, so a back-up must be in place for businesses using it.

Steven Fraser offers advice on IR35 legislation