The brand-new Chancellor, Jeremy Hunt, revealed that the off payroll working (IR35) guidelines introduced from April 2021 (6 April 2017 for the general public sector) are to continue the same in a reversal of the proposed repeal revealed by the previous Chancellor, Kwasi Kwarteng. On the basis that the rules won't alter, now is a great time to examine the level of your compliance with IR35 responsibilities. Particularly as the HMRC 'light touch' approach to penalties for inaccuracies that were not intentional ended on 5 April 2022, and HMRC is stepping up its compliance activity.livebh.com Recap on IR35 obligations Under the guidelines introduced from 6 April 2021, medium or large-sized organisations in the private and 3rd sectors (excluding those that are "completely abroad") have the obligation for deciding whether arrangements with 3rd celebration intermediaries such as Personal Service Companies (PSC) do in truth represent a disguised employment. Where an arrangement is considered 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, including company NIC, and where relevant the apprenticeship levy. The customer using the services of the worker operating by means of an intermediary such as a PSC is likewise needed to satisfy other responsibilities. For instance, when the client has used reasonable care and has identified whether the off payroll working guidelines use to an engagement, it is needed to communicate that choice in the kind of a Status Determination Statement (SDS). It is likewise necessary for the customer utilizing the services to use a status dispute process to handle any disagreements concerning the SDS and respond within 45 days. Where the customer is defined as a small service by the Companies Act 2006, obligation for assessing the plans, and using IR35 where necessary, will stay with the workers intermediary such as the PSC. Common issues and misunderstandings on off payroll working within the social housing sector Now that the IR35 intermediaries guidelines have been in place for over 18 months, our tax advisors, RSM, are seeing some repeating issues and misunderstandings within the sector around the rules, consisting of: Obligations with regard to PSC versus responsibilities with regard to self-employed individuals Whilst work status tests for employees supplying services to a client through their own intermediary such as a PSC are the exact same as status tests for self-employed workers who are not operating by means of a PSC, the responsibilities that you have in relation to each vary and we often see confusion around this. As above, responsibilities, and danger, in relation to the usage of PSCs by a medium or large customer apply from 6 April 2021 just, whereas your commitment to figure out whether a self-employed employee is really self-employed for tax functions have remained in location for several years under separate rules. Where you are utilizing the services of a PSC, then you are needed to verify your status evaluation in a formal SDS and provide a status disagreement process. A formal SDS does not require to be provided when a self-employed individual is working for you, although ou needs to still evaluate whether or not they are really self-employed, and you must keep a record of this. If the status of a who is not operating via a PSC is assessed and it is identified that they have the functions of employment, then they need to be dealt with as a real employee for both PAYE/NIC and work rights functions. Where a PSC employee is figured out as 'within IR35' then they are dealt with as a 'considered staff member' for PAYE/NIC purposes only and do not immediately have worker 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 through the CIS. It is crucial to stress that commitments in relation to evaluating employment status and IR35 must be undertaken for sub-contractors as they are for any off-payroll employee. It is only once you have actually identified that the off-payroll worker is outdoors IR35/genuinely self utilized that you can pay to them under the CIS. In this respect it is frequently ignored that each month-to-month CIS professional return needs a declaration to be finished verifying that the work status of each specific included on the CIS return has actually been considered and it has actually been validated that they are not in reality an employee or deemed worker. Obligations where workers are sourced by means of a recruitment agency Similar to lots of other organisations, housing associations often source momentary workers through 3rd parties such as recruitment companies. In this circumstance payments are made to the recruitment firm, but it is important to acquire verification from the firm on a worker-by-worker basis regarding whether or not the worker goes through PAYE/NIC by the firm. If the recruitment company is contracting with an employee operating by means of an intermediary such as a PSC and onwardly offering them, then the housing association as the customer (i.e the end user of the employee's services) has IR35 obligations, unless it is a small business as defined by the Companies Act 2006.livebh.com Importantly, the housing association must consider the status of the employee and provide a SDS to both the company that it contracted with and the worker. Failure to satisfy this commitment can result in the housing association becoming liable for any PAYE/NIC due. Due diligence on the labour supply chain is also crucial since, beyond IR35, there can be other tax and/or reputational risks if the employee is engaged by a celebration in the labour supply chain who is not properly operating PAYE. For example, where the employee is working for a client in the UK, however is engaged by a celebration in the labour supply chain based beyond the UK who is not operating In summary, for now a minimum of, 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 charges. All housing associations must occasionally evaluate their compliance in the prominent area of employment status. Our tax consultants RSM deal with many housing associations and other organisations with regard to their commitments under the off payroll working rules and would be pleased to assist with any questions. For a preliminary discussion please contact David Williams-Richardson. The Chancellor announced that the off payroll working rules presented from April 2021 are to continue. Now is a great time to check the level of your compliance with IR35 responsibilities.