HMRC Commence IR35 Private Sector Checks
Reports have recently emerged stating that just over 5 months into the roll out of IR35 changes in the Private Sector HMRC has already commenced its compliance activity. The ICAEW is reporting that HMRC have issued letters to oil and gas, finance and banking organisations seeking to obtain information on their processes for hiring and engaging with contractors.
See an example of HMRCs letter here!
This development may come as a surprise to some organisations who anticipated that by HMRC introducing a ‘soft landing’ and taking a lenient approach to penalties for the first year, this may also mean that they wouldn’t commence compliant checks within the first 12 months.
This activity comes on the back of some high-profile Public Sector IR35 cases which has seen the likes of Department for Work and Pensions, the Home Office and even HM Courts and Tribunal Service reaching settlements with HMRC after incorrectly assessing off-payroll workers using HMRC’s CEST Tool.
HMRC’s intention will be to identify those organisations who are taking their new responsibilities seriously and continuing to demonstrate Reasonable Care and those organisations who put in place inadequate processes or have failed to act and are flouting the rules. It is likely that if an organisation can satisfy HMRC that it is doing everything within its power to demonstrate reasonable care in accordance with Chapter 10 ITEPA 2003, HMRC will not pursue the matter any further.
If you are an organisation who has failed to assess your off-payroll workers yet, has assessed them but not in line with the reasonable care requirements (e.g. relied on an automated decision making tool, such as CEST, without the necessary controls in place) or you have done the initial assessments but you haven’t considered reassessments, now is the time to act.
HMRC’s letter, initiating the compliance activity also raises a question around the processes business have in place for deciding if any services they outsource are fully contracted out. This is an interesting question as it signifies that HMRC view the use of SOW to shift risk and responsibility away from the end user of the labour as an area of potential non-compliance.
It is interesting that HMRC have focussed this initial compliance activity on the end hirer, not the agency (or fee payer). The new IR35 rules require end hirers to meet the reasonable care requirement and this is what HMRC are seeking to assess. If too much reliance has been placed on the recruitment supply chain or the contractors themselves to undertake the IR35 assessment end hirers could be exposed to risk as HMRC approach them for evidence of their processes.
Whilst HMRC are currently looking at the oil and gas, finance and banking sectors we don’t know which other sectors are high on HMRC’s list and the best course of action to take is to ensure that you are continuing to comply with your obligations.
See an example of HMRCs letter here!
Brookson Legal Services can assist in undertaking IR35 reviews of your off-payroll workers, providing training for staff, establishing IR35 compliant processes and procedures and undertaking IR35 reassessments to ensure you are and continue to meet the Reasonable Care requirement.
If you require any more information on how Brookson Legal can help and support your organisation in demonstrating Reasonable Care get in touch with Brookson Legal.