The brand-new Chancellor, Jeremy Hunt, announced that the off payroll working (IR35) guidelines introduced from April 2021 (6 April 2017 for the public sector) are to continue the same in a turnaround of the proposed repeal announced by the previous Chancellor, Kwasi Kwarteng. On the basis that the guidelines will not alter, now is a great time to check the level of your compliance with IR35 obligations. Particularly as the HMRC 'light touch' method to penalties for errors that were not purposeful ended on 5 April 2022, and HMRC is stepping up its .versus.com Recap on IR35 commitments Under the rules presented from 6 April 2021, medium or large-sized organisations in the private and third sectors (omitting those that are "completely overseas") have the duty for choosing whether plans with 3rd party intermediaries such as Personal Service Companies (PSC) do in truth represent a disguised work. Where an arrangement is considered to be 'inside IR35' on the basis that it is a disguised work, then the fee payer is responsible for running PAYE/NIC on payments, including employer NIC, and where appropriate the apprenticeship levy. The client utilizing the services of the employee operating by means of an intermediary such as a PSC is likewise needed to fulfill other responsibilities. For instance, as soon as the customer has actually applied affordable care and has actually figured out whether the off payroll working rules apply to an engagement, it is needed to interact that decision in the type of a Status Determination Statement (SDS). It is likewise essential for the client using the services to offer a status difference process to deal with any disputes concerning the SDS and react within 45 days. Where the customer is specified as a little company by the Companies Act 2006, obligation for evaluating the plans, and applying IR35 where essential, 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 rules have been in location for over 18 months, our tax advisers, RSM, are seeing some recurring concerns and misconceptions within the sector around the guidelines, consisting of: Obligations with regard to PSC versus commitments with regard to self-employed people Whilst employment status tests for employees supplying services to a customer by means of their own intermediary such as a PSC are the same as status tests for self-employed workers who are not running through a PSC, the obligations that you have in relation to each vary and we typically see confusion around this. As above, responsibilities, and risk, in relation to the usage of PSCs by a medium or large client use from 6 April 2021 just, whereas your commitment to determine whether a self-employed worker is genuinely self-employed for tax functions have been in place for several years under different rules. Where you are using the services of a PSC, then you are needed to confirm your status evaluation in an official SDS and use a status disagreement procedure. An official SDS does not require to be issued when a self-employed person is working for you, although ou must still evaluate whether or not they are truly self-employed, and you must keep a record of this. If the status of a self-employed worker who is not running through a PSC is assessed and it is figured out that they have the features of employment, then they should be treated as a real worker for both PAYE/NIC and work rights purposes. Where a PSC worker is figured out as 'inside IR35' then they are treated as a 'considered employee' for PAYE/NIC purposes just and do not automatically 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 via the CIS. It is important to stress that obligations in relation to assessing employment status and IR35 should be undertaken for sub-contractors as they are for any off-payroll employee. It is just once you have identified that the off-payroll employee is outdoors IR35/genuinely self used that you can pay to them under the CIS. In this regard it is typically ignored that each regular monthly CIS professional return needs a declaration to be completed validating that the employment status of each specific consisted of on the CIS return has been considered and it has actually been confirmed that they are not in fact a staff member or deemed staff member. Obligations where workers are sourced by means of a recruitment company Similar to numerous other organisations, housing associations typically source short-lived workers via third parties such as recruitment companies. In this scenario payments are made to the recruitment agency, however it is essential to acquire confirmation from the firm on a worker-by-worker basis as to whether or not the worker is subject to PAYE/NIC by the firm. If the recruitment firm is contracting with a worker operating by means of an intermediary such as a PSC and onwardly supplying them, then the housing association as the customer (i.e the end user of the employee's services) has IR35 responsibilities, unless it is a small company as defined by the Companies Act 2006. Importantly, the housing association must think about the status of the worker and provide a SDS to both the company that it contracted with and the employee. Failure to satisfy this commitment can result in the housing association ending up being accountable for any PAYE/NIC due. Due diligence on the labour supply chain is likewise important because, outside of IR35, there can be other tax and/or reputational dangers if the employee is engaged by a celebration in the labour supply chain who is not properly running PAYE. For example, where the worker is working for a customer in the UK, but is engaged by a celebration in the labour supply chain based beyond the UK who is not running In summary, in the meantime at least, the off payroll working rules are here to remain and HMRC are stepping up their compliance activity following the end of the 'light touch' year for charges. All housing associations ought to occasionally evaluate their compliance in the prominent area of work status. Our tax consultants RSM work with lots of housing associations and other organisations with regard to their obligations under the off payroll working rules and would be pleased to assist with any questions. For a preliminary conversation please contact David Williams-Richardson. The Chancellor announced that the off payroll working rules introduced from April 2021 are to continue. Now is a great time to examine the level of your compliance with IR35 responsibilities.