Got contractors or workers supplying their services to your organisation personally, or via their own limited company or other intermediaries (personal service company or partnership?).
Is your organisation covered by the off-payroll working rules?
If yes, then you need to make sure that you have addressed your IR35 risk as it is now your responsibility, as the end client, to assess these types of arrangements and determine whether those individuals are caught by IR35 and how to treat them, weighing up the risk of hefty fines from HMRC against the additional costs of treating them as employees.
Factor in reluctance on the part of consultants who do not want to be classed as employees too, and this has become a tricky issue for employers.
We are here to help!
If they are, they will be treated as employees for tax purposes and your business should be paying national insurance and potentially income tax too, for each of them – if you don’t, or if you don’t correctly assess the roles and get this wrong, then you run the risk of significant penalties from HMRC and employment claims in the Employment Tribunals.
Whilst it helps, as is always the case, the authorities will look behind that to make sure that the arrangements reflect “what it says on the tin”.
What matters most is what is happening in reality, not what the arrangement is called and so you shouldn’t try and dress it up as something it is not – to do so carries huge risks as HMRC looks very closely at what it calls “personal service companies”, checking that they are not simply smokescreens for contractors who are really employees in all but name.
If you are in any doubt, then take advice and get it assessed with us so you can make an informed decision if it is worth carrying any risk and what to do about it.
Ultimately, as mentioned above, if what is happening in reality and on assessment means that those individuals are caught by IR35, then you should accept it and, if practical for your organisation and them, treat them accordingly, as employees, to avoid risk.
But this risk does not just extend to the off-payroll working rules.
Even if IR35 does not apply, for whatever reason, if an employment status assessment reveals that the “self-employed” individual is actually an employee, then you would be similarly advised to treat him or her accordingly as those individuals will potentially automatically carry with them a raft of employment law rights and protections that you aren’t aware of - exposing you, again, to Tribunal claims as well as significant HMRC penalties and financial liability for example, backdated tax, NI and holiday pay.
Ignoring this and continuing to treat them as self-employed does not remove these rights if they are actually employed and so, again, a proper assessment will enable you to make informed decisions on the risks and what to do about them. Informed is best!
Despite that, there are still things you can do to make sure that your business doesn’t fall foul of IR35 or acquired (and sometimes accidental!) employee status.
Truly self-employed individuals can take steps to prove that they are in business on their own account to give themselves the best chance of establishing this – all of which we can advise on.
Then, as long as this matches what is happening “on the ground” this does not need to mean the end of freelancing for those individuals.
We can help you to assess each individual arrangement and advise you of your likely liability including the following: -
If your business does hire contractors, we can help you with regular reviews of your working arrangements to keep the risk of accidentally falling foul of IR35 as low as possible, liaising with your company accountants too if you would like.
Just because one contract with that consultant was not caught by IR35 does not mean the next will not and so it pays to keep this under regular review.
We can also advise on all likely and potential risks and can also help you to create clear and properly drafted terms of engagement that detail working arrangements that match reality, with strategic advice alongside, so that you can ensure that, where employment is not an option, those working relationships fall properly outside of the off-payroll working rules and employment status where possible.
Getting in touch with any niggling doubts about certain working arrangements will mean that you can properly plan and protect your business.
If you would like more information on this, we are hosting a free lunchtime webinar on 13 October 2022. We will cover employment status with practical tips and a guest appearance from Aaron Gilmore of Treybridge Accountants to give advice on the tax implications of getting it wrong.
If you would like to find out more and sign up, visit the dedicated page here.