HMRC off-payroll working (IR35) guidelines – a hard act to follow?

HMRC has recently published its guidelines for compliance regarding IR35, consisting of 14 parts and available on their website at https://www.gov.uk/government/publications/help-to-comply-with-the-reformed-off-payroll-working-rules-ir35-gfc4.

Although there is nothing new in the guidance, HMRC has prepared it with the aim of both demonstrating what constitutes reasonable care from a compliance perspective and what it considers good practice to look like. This may come as rather an unpleasant surprise to some organisations because while HMRC’s suggestions are largely realistic, it brings into focus the range and depth of different areas that need to be considered.

Taking a deeper dive into the sections, the following are worthy of particular attention:

Training your staff (part 2) helps organisations understand the extent to which HMRC expect key stakeholders to understand the legislation and internal process/policies. The guidance also identifies the extent to which different stakeholders will likely require different training and how often the training should be refreshed.

Record keeping (part 3) goes into detail on the types of records that should be maintained by an organisation. HMRC make it clear that these records should be periodically reviewed to ensure they’re up-to-date and reflect the realities of the engagement.

Considering the requirements of a new role (part 4) explains the stages at which they would expect a status determination to be completed and what HMRC considers represents good practice. In HMRC’s opinion, determinations should be completed prior to advertising/hiring for the role, again once the contractor has started in the role and then again, in the event that the role changes at all. Alongside this, HMRC also outline all of the different stakeholders they would expect to be involved with each status determination.

Considering your off-payroll working population (part 5) focuses on identifying the contractor population and what HMRC expects good preparation to look like here. To help with identifying off-payroll working populations, please see our video at BDO’s Off-Payroll Risk Manager| Demo.

Outsourcing off-payroll working responsibilities (part 12) covers the extent to which the responsibilities can be delegated and where organisations retain responsibility. Separate to this, but on a related topic, HMRC have also published guidance on engaging with umbrella companies which can be found at https://www.gov.uk/guidance/responsibilities-for-employment-businesses-working-with-umbrella-companies.

Internal audit process — periodic reviews (part 13) talks about how businesses should be continuously reviewing their policies/processes to ensure they remain compliant. Importantly it talks about the areas that should be periodically reviewed and provides some useful examples. For organisations within the SAO regime, it also covers the fact that any organisation subject to the IR35 legislation is also likely to be subject to SAO reporting - highlighting the cross-over that arises between the different pieces of legislation.

Overall this guidance is a useful reference point and clearly shows the high level of accuracy that HMRC expects from businesses using ?off-payroll workers. To find out more on how we can assist with managing your compliance not just in terms of off-payroll working but all tax matters relating to labour supply chains, please get in touch.