HMRC publishes 3 guides regarding IR35 guidance for employers

HMRC publishes 3 guides regarding IR35 guidance for employers

HMRC has published 3 guides which clarify the tax status of

• contractors in a labour supply chain,
• employer responsibilities and
• non-compliance risks under intermediaries rules

The guidelines are aimed at organisations operating under the reformed off-payroll working rules (IR35) and with umbrella companies.

The guides set out clearly what HMRC considers the ‘good and bad’ practices when preparing for and making status determinations for off-payroll workers.

The guides contain information on how to prepare for, and make status determinations for off-payroll workers, tips on working with others in the supply chain, and how to ensure all workers that provide their services through an intermediary are correctly identified and considered under the off-payroll working rules.

HMRC have also stressed the importance of an organisation if it is implementing the off-payroll working rules for the first time, then they need to review all existing workers. This is to identify any workers already hired who may now fall within scope of the rules.

This is also important when organisations take on new agencies or contracts which involve any element of labour supply, such as managed services. It is also important to consider the rules for any worker that provides their services through their own intermediary, such as a personal service company.

The guides also explain issues to look out for when working with others in the supply chain to gain assurance that income tax and National Insurance contributions are being deducted by the correct operation of PAYE, when off-payroll workers are deemed to be employed.

Working with the Treasury and the Department for Business and Trade, HMRC has also published new guidance for employment businesses who work with umbrella companies. This guidance will help them to understand their legal responsibilities, support umbrella company workers in their supply chains and protect their business by reducing their risk of non-compliance.

HMRC have always stressed that there can be serious consequences for any business if you they are involved in non-compliant supply chains and do not take reasonable measures to avoid this. A non-compliant supply chain might include umbrella companies who do not follow employment and tax law.

If HMRC investigates and finds a company is involved in non-compliant supply chains, action is likely to be taken . This includes but is not limited to prosecution for failure to prevent the facilitation of tax evasion in the supply chain and issuing an enablers penalty for use of an umbrella company that is operating tax avoidance.

The updated guidance for umbrella company workers working through an umbrella company now includes checks that workers can do to identify and avoid fraudulent umbrella companies.

As always, if you have any questions, please get in touch with us here at Kennedys Accounting and our team will be pleased to assist.