In a recent article by the Financial Times, it was reported that HMRC had issued fines to the HM Courts and Tribunal Service, making it the third government department to be in breach of the IR35 rules. The department paid £12.5 million in relation to the IR35 liabilities due to incorrect assessments it had made regarding the employment status of its workers.
As evidenced, if HMRC are happy to go after the public sector, particularly government bodies, then no one is safe from their remit. Both public and private business need to make sure that they are compliant with the IR35 rules, to avoid being hit with large fines. Many organisations have found the rules to be complex and have made mistakes, such as determining that worker working through an intermediary doesn’t fall under IR35.
The off-payroll workers rules, commonly known as IR35, was first introduced to the public sector in 2017, and a revised set of rules were rolled out to the private sector in April 2021. Employers need to check their off-payroll worker’s employment status, so that they are able to be taxed correctly. This includes workers provided by an agency or a third party. The rules apply when a worker supplies their services to a client via an intermediary, in circumstances where they would be an employee if they contracted directly with the client.
For more detailed information on IR35, you can visit our IR35 resource hub.
We have advised organisations of all sizes and operating in all sectors, with setting up robust processes and reviewing their engagements with off-payroll workers, by producing detailed employment status reports, helping to minimise risk where the position is not clear.
As the rules have been criticized as being too nuanced, our recommendation is to check with an experienced professional to help you determine the risk, before submitting your responses to HMRC, and run the risk of being sent a fine.
For more information on how we can help you, please contact Andy Hamman or your usual Crowe contact.
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