Part 1 – Lack of knowledge and training on IR35
IR35 is a piece of legislation relating to employment status for tax purposes, if the person completing the assessment is suitably qualified (i.e. legally qualified) then the reviews are likely to pass reasonable care as HMRC state that seeking the advice of a qualified professional is sufficient.
How do I know if I have the right resource in-house?
The question you need to ask is are the persons responsible sufficiently qualified? You wouldn’t ask an unqualified person to give you legal advice pertaining to another legal issue of employment law.
If the assessment is being completed via a questionnaire, online tool or and automated decision-making tool and the person inputting the information doesn’t fully understand IR35, the nuances of the legislation and the questions being asked, then this is unlikely to pass reasonable care.
HMRC have released Employment Status Manuals (ESM’s) to provide guidance on these subjects and HMRC ESM10014 relates specifically to reasonable care and states the following will not be classed as passing this integral test:
- An absence of any proper support or training within the organisation to enable those individuals responsible for making determinations to accurately consider the off-payroll working rules
- Inputting inaccurate information into CEST (an online tool)
- Failing to take account of all relevant evidence
- The person tasked with completing the SDS does not possess the knowledge required to complete it and is not provided with the required level of support
How can a lack of knowledge on IR35 affect my business?
If you cannot demonstrate that you have taken reasonable care, then it is likely that HMRC will open an investigation and if the assessments are incorrect the liability for unpaid tax, NIC, fines and penalties will sit with you. It is important to note that they can be substantial amounts.
In the Public Sector we have witnessed organisations receiving requests from HMRC to demonstrate how they met reasonable care. This is the first stage of any investigation and HMRC will require any documentation containing policies, processes, results of assessments and most importantly, how these have been completed to see if the organisation has discharged their duty of reasonable care.
If you think your business doesn’t’ have the experience to complete this process inhouse, contact Brookson Legal for further advice.