The new Chancellor, Jeremy Hunt, revealed that the off payroll working (IR35) guidelines presented from April 2021 (6 April 2017 for the general public sector) are to continue unchanged in a reversal of the proposed repeal announced by the previous Chancellor, Kwasi Kwarteng. On the basis that the rules will not alter, now is a great time to examine the level of your compliance with IR35 obligations. Particularly as the HMRC 'light touch' technique to charges for inaccuracies that were not deliberate ended on 5 April 2022, and HMRC is stepping up its compliance activity. Recap on IR35 responsibilities Under the guidelines introduced from 6 April 2021, medium or large-sized organisations in the personal and 3rd sectors (leaving out those that are "wholly overseas") have the responsibility for choosing whether plans with 3rd party intermediaries such as Personal Service Companies (PSC) carry out in fact represent a disguised work. Where an arrangement is deemed to be 'inside IR35' on the basis that it is a disguised employment, then the cost payer is responsible for operating PAYE/NIC on payments, including company NIC, and where suitable the apprenticeship levy. The customer utilizing the services of the employee operating through an intermediary such as a PSC is also required to fulfill other responsibilities. For instance, when the client has actually applied affordable care and has figured out whether the off payroll working rules apply to an engagement, it is required to interact that choice in the kind of a Status Determination Statement (SDS). It is likewise needed for the customer utilizing the services to use a status argument process to handle any conflicts relating to the SDS and respond within 45 days. Where the customer is specified as a small company by the Companies Act 2006, duty for examining the plans, and applying IR35 where essential, will remain with the employees intermediary such as the PSC. Common problems and misconceptions on off payroll working within the social housing sector Now that the IR35 intermediaries guidelines have remained in place for over 18 months, our tax consultants, RSM, are seeing some repeating issues and misconceptions within the sector around the rules, including: Obligations with regard to PSC versus commitments with regard to self-employed people Whilst work 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 employees who are not operating by means of a PSC, the obligations that you have in relation to each vary and we often see confusion around this. As above, responsibilities, and risk, in relation to using PSCs by a medium or big customer use from 6 April 2021 just, whereas your obligation to identify whether a self-employed worker is really self-employed for tax functions have been in place for lots of years under different guidelines. Where you are utilizing the services of a PSC, then you are needed to verify your status evaluation in an official SDS and use a status disagreement process. A formal SDS does not require to be provided when a self-employed individual is working for you, although ou must still assess whether or not they are really self-employed, and you ought to keep a record of this. If the status of a self-employed worker who is not running via a PSC is evaluated and it is determined that they have the features of employment, then they must be dealt with as a real employee for both PAYE/NIC and work rights functions. Where a PSC employee is determined as 'within IR35' then they are treated as a 'considered employee' for PAYE/NIC purposes only and do not immediately have staff member 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 very important to stress that responsibilities in relation to examining employment status and IR35 should be undertaken for sub-contractors as they are for any off-payroll worker. It is only when you have figured out that the off-payroll worker is outside IR35/genuinely self utilized that you can make payments 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 validating that the employment status of each private consisted of on the CIS return has actually been thought about and it has actually been confirmed that they are not in reality a staff member or considered worker. Obligations where workers are sourced through a recruitment firm Just like lots of other organisations, housing associations often source short-lived workers by means of 3rd celebrations such as recruitment companies. In this circumstance payments are made to the recruitment agency, however it is very important to acquire confirmation from the firm on a worker-by-worker basis regarding whether or not the worker undergoes PAYE/NIC by the firm. If the recruitment company is contracting with a worker operating through an intermediary such as a PSC and onwardly supplying them, then the housing association as the client (i.e completion user of the employee's services) has IR35 obligations, unless it is a small organization as defined by the Companies Act 2006. Importantly, the housing association should consider the status of the employee and release a SDS to both the firm that it contracted with and the worker. Failure to fulfill this commitment can result in the housing association becoming liable for any PAYE/NIC due. Due diligence on the labour supply chain is also essential because, beyond IR35, there can be other tax and/or reputational risks if the worker is engaged by a party in the labour supply chain who is not correctly 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 outside of the UK who is not running In summary, in the meantime a minimum of, the off payroll working guidelines 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 must regularly review their compliance in the prominent area of employment status. Our tax consultants RSM work with lots of housing associations and other organisations with regard to their obligations under the off payroll working guidelines and would be pleased to aid with any inquiries. For an initial conversation please connect with David Williams-Richardson. The Chancellor revealed that the off payroll working guidelines introduced from April 2021 are to continue. Now is a great time to examine the level of your compliance with IR35 obligations.