Guidance

Firstly, and amongst other things, those recruiters are likely to see their clients looking to them for advice and support regarding their new obligations and those recruiters without the necessary knowledge to support their clients will have to find that expertise elsewhere (Brookson Legal can help). Secondly, recruiters are quite likely to see some of their contractors, particularly those who have scarce skills and who are deemed to be “disguised employees” by their hirers, seeking improved day rates, which might lead to a squeeze on agency margins.

There is a commercial risk and challenge that derives from the change. You may have noticed an increase of questions from candidates regarding their IR35 status and clients will have wanted you to help them with the compliance challenges.

There has been much publicity, quite rightly, on the hirer’s obligation to employment status test contractors, and on the tax risk which comes with not taking reasonable care. However, the legislation still says that it is the fee payer (which will usually be the agency) who must deduct the correct Income Tax and NICs. So this means that HMRC might pursue the agency, if it considers that incorrect Income Tax and NICs haven’t been deducted, even where the agency has followed the instruction of the hirer (who has acted with reasonable care).

Although HMRC have moved compliance to the hirer, and although it is the hirer who has the reasonable care obligation, the Public Sector legislation does not say that an agency has followed the hirer’s instruction is in the clear.