Amongst all the big news announced in the UK’s mini-budget last week came an announcement about the IR35 2017 and 2021 reforms. ‘Public sector off-payroll rules’ and ‘private sector off-payroll rules’ are going to be scrapped next year.
This means that end-hirers (public and private) will no longer be liable for assessing the employment status of personal services companies. These status checks will, once again, become the responsibility of the contractor.
But businesses should be careful with the rollback of these changes. Why?
The corporate offence of failure to prevent the facilitation of tax evasion was introduced back in September 2017 as part of the Criminal Finances Act 2017. This means that companies have a responsibility to guard against tax evasion carried out by individuals performing services for, or on behalf of, the company.
What does this have to do with IR35?
If you have already carried out employment status checks on your contingent workforce and identified without any doubt that those specific roles and assignments are in-scope of IR35, you could run into problems if your company allowed workers to switch to an IR35 out-of-scope arrangement.
Why? Because in that situation – agreeing to a new contract and making payments without tax deductions for the same role and assignment without carrying out a new assessment – you may be facilitating the contractor to evade tax.
Does this mean I will still have to carry out employment status check assessments even after the reforms have been scrapped?
Not necessarily. What it means is that if you already know that a role or assignment is within scope of IR35 - because you carried out an assessment in the past using reasonable care - you should not knowingly allow for the same engagement to be performed outside IR35.
If your company has ‘reasonable prevention procedures’ to prevent tax evasion facilitation in place, or in situations where it is unreasonable to expect such procedures, it will have a defence. But ignoring the outcomes of past assessments can present a risk to hirers and intermediaries.
And don’t forget...
End-hirers and intermediaries remain liable for the employment status of sole traders. IR35 only applies to personal services companies. What’s commonly known as the ‘agency tax rules’ have not been repealed.
What happens if your business is found to have committed an offence?
There are serious repercussions. Unlimited fines and significant damage to reputation - with the offence being made a matter of public record. So, stay alert!
Want to find out more? Contact PEO Legal.
At PEO Legal, we provide legal and compliance advice for professional employer organisations and staffing companies around the world. To find out more about corporate responsibility for employment status - or any other point of staffing law - contact us, today.