Supply chain compliance – What this means for your business?
The new IR35 regulations set to come in on April 6th put the emphasis on the end client to make the right determination for contractors they work with. But it’s not simply a case of issuing a Status Determination Statement (SDS) and continuing as usual. There must be communication throughout the supply chain with every party fulfilling their roles and complying properly. Otherwise, you may find yourself, as the end hirer, liable for unpaid contributions.
Taking reasonable care
Firstly, you must consider determinations and review them regularly to ensure all of the information remains accurate. Throughout this process you must demonstrate reasonable care, this will protect you from any unexpected liabilities in the future. It should also be carefully documented so you can show how you came to your determination.
This information could be called upon if a contractor challenges your decision. If this is the case you have 45 days to gather your evidence together and provide to the contractor. It will also be of use if you need to show HMRC that you took reasonable care when completing your determination.
Reasonable care doesn’t just end, it’s an ongoing process. It’s important to make sure this is continued post-April as it still needs to be taken into consideration when hiring for new roles and also when re-reviewing ongoing roles.
Updating the supply chain
The next part of the process is particularly important as communicating the determination to others areas of supply chain. The contractor needs this information so they can ensure they are using the right working option, but it is also important that the fee receives this update. The fee payer is obligated to pay Income Tax and National Insurance Contributions to HMRC, this will have been identified in the SDS. In many cases, the fee payer will be a recruitment agency and depending on the determination, will be paying the contractor through a limited company or umbrella solution.
Failure of the fee payer to meet its liabilities
If the fee payer is unable to meet its liabilities or ceases to trade, then the responsibility for the taxes and other deductions will return to you as the end hirer. This is why it’s important to work with trusted organisations throughout the supply chain that comply with their obligations, otherwise your business could find themselves with a large unexpected tax bill.
Reduce risk with a contractual right to audit fee payer
When drawing up contracts be sure to include right to audit clauses, as this will ensure you have access to key information pertaining to the fee payer’s processes. This is the best way to mitigate risk as it allows you to monitor the supply chain and make sure everyone is complying. Otherwise, you could find that failures on the fee payer’s part come back to you.
If this is something you are struggling with, get in touch with the Brookson team who are on hand to help with supply chain compliance strategies.