With changes to IR35 now in place in the Private Sector, there’s no better time to arm yourself with our free FAQ’s, Guides and Video guidance that you can reference whenever you need.
Firstly, and amongst other things, those recruiters were likely to have seen their clients looking to them for advice and support regarding their new obligations, and those recruiters without the necessary knowledge to support their clients had to find that expertise elsewhere (Brookson Legal could have helped). Secondly, recruiters were quite likely to have seen some of their contractors, particularly those who had scarce skills and who were deemed to be ‘disguised employees’ by their hirers, seeking improved day rates, which might have led to a squeeze on agency margins.
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 legislation does not say that an agency has followed the hirer’s instruction is in the clear.
To ensure compliance with IR35 regulations as a recruiter, consider the following steps:
- Clearly stipulate tax obligations and accountability in contracts and terms of business.
- Exercise due diligence in evaluating each assignment, ensuring accurate determination of IR35 status as a routine practice.
- Maintain documented evidence of IR35 Status Determination decisions for the prescribed legal duration.
- In cases where a contractor falls within IR35 and is not paid through an umbrella company, take on the responsibility of making PAYE payments to HMRC before disbursing the net amount to the contractor’s limited company.
Recruitment agencies have the capacity to provide valuable assistance in the realm of IR35 assessments, aiding end clients in the accurate determination of a contractor’s status. This service not only simplifies the compliance process but also underscores the agency’s dedication to assisting clients in meeting their legal obligations.
Moreover, agencies can play a pivotal role in educating contractors about IR35 regulations and offering guidance on optimising their tax affairs. Whether through workshops, resource materials, or collaboration with tax experts, agencies have the means to empower contractors with the knowledge needed to make informed decisions. This not only enhances contractor satisfaction but also cultivates their loyalty.
Additionally, recruitment agencies can facilitate smoother transitions in response to changes in IR35 legislation by providing expert guidance on adjusting contracts and engagement models. By proactively embracing IR35, recruiters can bolster their reputation within the industry and reinforce their position as indispensable partners for both contractors and clients.
(Brookson Legal can support you with this).
Frequently, it is the recruitment agency that assumes the role of the Fee-Payer. The Fee-Payer, positioned nearest to the contractor within the supply chain, bears the responsibility for disbursing payments to the contractor. In cases where a role falls within IR35, Fee-Payers are tasked with withholding taxes and National Insurance contributions, forwarding them to HMRC.
Written by our experts, these guides will give you the tools to understand the implications of IR35 as a contractor, recruiter or hirer.
HOW DOES IR35 AFFECT RECRUITERS?
With IR35 now in effect, we explain what IR35 is, the changes and how this will impact businesses recruiters that place contractors.