Workr Compliance Collaborate With STR Group

With the Off Payroll Private Sector Reform just around the corner, Workr Compliance have collaborated with recruitment agency STR Group to help them prepare for the changes and support their largest clients.

Below, we explore what the collaboration means for STR Group – as well as what you can do if you’re yet to prepare for the IR35 changes in April 2021.

Supporting business as usual

Working in collaboration with Andrew Webster and the Workr Compliance team, STR Group wants to support engagers, meet their business objectives and maintain business as usual ahead of the reform and beyond.

David James, Engineering Programme Director at STR Group, said the collaboration between STR and Workr would provide consultancy to their largest clients, and reiterate their message that IR35 preparation needs to start now.

Helping clients take reasonable care

It’s not just about preparing either. Businesses need to ensure that they are preparing in the right way – and that includes showing reasonable care and not just using blanket determinations. After all, scoping your projects and the IR35 status of your contractors is just the beginning.

Once you’ve determined the status of your projects, you need to highlight how and why you came to that decision, demonstrating that you’ve thoroughly reviewed an individual’s contracts and working practices among other factors. IR35 compliance isn’t just about the initial status assessment either – it’s about continuously assessing your projects, ideally every 12 months as a minimum. This is something that Workr Compliance will be supporting STR Group with.

Ensuring proper preparation

Despite having originally meant to come into effect in April 2020, many businesses are still yet to prepare for IR35. And now, with the UK economy struggling amidst the COVID-19 pandemic, many are warning that the government may use non-compliance as a means of raising capital.

Recent stories, including that of Transport for London, also highlight that HMRC will treat all those suspected of non-compliance equally, regardless of the organisation. In fact, compliance of the entire supply chain is at the forefront of the government’s mind. STR Group recognises the value of having a robust process in place ahead of time in order to be compliant from the get-go.

Turn to us for support

At Workr Compliance, we’re not only dedicated to helping end clients, agencies and contractors prepare for the Off Payroll Private Sector Reform, but we also want to get more people talking about it. IR35 shouldn’t be feared. In fact, it brings with it an opportunity while attracting and retaining talent.

It’s for this reason that we have decided to launch a new webinar series that will highlight the stark reality of the IR35 reform and what it means for the future workforce. More information will be released on our social media channels soon, but you can contact us via our dedicated IR35 Hub if you have any questions in the meantime.

IR35 – deferred, not defunct!

As we entered 2020, one of the key topics on our agenda was the IR35 Off Payroll Private Sector Reforms.

The intermediaries legislation, as it is also known, had seen some controversial reforms already introduced to the public sector back in 2017. These reforms were due to make their arrival in the private sector on the 6th of April 2020.

However, as a result of the COVID pandemic and resultant lockdown measures, the Government made the decision to defer the reforms until the 6th April 2021.

Whilst the decision to defer was a great relief to many, we now find ourselves only six months away from the implementation of the reforms.

For those hoping that the legislation would be scrapped or forgotten, the reality is that the legislation is already law, although not yet enforced.

Barring any extraordinary legal or political development, the changes will take effect on the 6th of April 2021.

What is IR35? Let’s recap

IR35, also known as the Intermediaries Legislation, is tax legislation aimed at tackling tax avoidance.

The legislation is designed to test whether workers providing their services and expertise to a client via an intermediary, such as a limited company, would otherwise be an employee of the client if the intermediary did not exist.

If caught by the IR35 legislation, the earnings of “deemed employees”, as they are referred to by HMRC, are subject to income tax and National Insurance Contributions (NIC’s).

What are the IR35 reforms?

It is currently the responsibility of the worker to determine whether their assignment is caught by IR35. The worker is also responsible for paying the correct taxes dependent on their IR35 status.

The reforms, scheduled to take effect in the private sector from 6th April 2021, will see the following key changes:

  • Shift the responsibility of IR35 determination from the worker to the engager (the company utilising the worker).
  • If caught by IR35, the responsibility for the payment of income tax and NICs will also shift from the worker to the fee payer (the organisation paying the worker for their services). This could be the engager or an agency (if the worker is supplied in this manner).

Does IR35 affect my business?

If your business utilises workers who provide their services via their own limited company, either directly or via an agency, then the IR35 legislation may apply to you.

There is an exemption for small businesses who meet any two of the following three criteria:

  • Turnover – not more than £10.2 million.
  • Balance sheet total – not more than £5.1 million.
  • Number of employees – no more than 50.

Where a worker is engaged by a small business, the responsibility for determining the IR35 status, along with the payment of taxes will remain with the worker.

What should you do if IR35 applies to your business?

If your business engages workers and is not classified as a small business you will need to prepare for your new responsibilities once the reforms take effect.

The key change that you must prepare for is your new responsibility for determining the IR35 status. The legislation states that, as the engager, you must take reasonable care in how you go about making the determination.

Once you have made the determination, you will also be responsible for communicating the results of your determination to the next party in the supply chain. This must be done in the form of a Status Determination Statement (SDS).

What does reasonable care mean?

By reasonable care, HMRC means that you must conduct a thorough and detailed assessment of the work to be carried out by the worker.

This assessment must include the working conditions and terms under which the service is to be provided.

HMRC recommends that you:

  • Formalise and record a consistent Status Determination process which is regularly reviewed to ensure fitness for purpose.
  • Seek the advice and/or assistance of a qualified, professional advisor such as the Workr Group.
  • Involve people with a good understanding of the work to be conducted in the determination process.
  • HMRC recommends the use of its Check Employment Status for Tax (CEST) test although this is not mandatory. There are a number of excellent alternative tools capable of producing robust and accurate determinations. It is highly recommended that you utilise a status determination test tool wherever possible. Such tools simplify the determination process and promote consistency across tests.
  • Ensure that determinations are regularly reviewed to ensure continued accuracy and validity.
  • Ensure that new status determinations are conducted after any material changes to terms or working conditions.
  • Define and communicate a clear process for challenges against determinations.

What are the risks of not taking reasonable care?

Once the engager has issued the SDS to the fee payer, all responsibilities then pass to the fee payer.

HMRC will always approach the fee payer in the first instance when conducting an investigation with regard to whether reasonable care has been met. However, any recourse could lead HMRC to the engager.

Where the engager is deemed not to have taken reasonable care in determining the IR35 status of a worker, HMRC can transfer any debt for unpaid taxes to the engager.

The same can be said for if the engager fails to respond to any challenge made by the worker against the determination.

It is vitally important, therefore to follow the guidelines above to ensure that reasonable care is taken during the determination process.

Debts can also be transferred where the fee payer simply does not pay taxes due to HMRC.

Where there is a chain of providers (MSP’s and agencies) involved in the supply of flexible workers, engagers must ensure that they conduct rigorous and regular due diligence checks of its supply chain in order to minimise its transfer of debt risk.

What now?

We have a specialist team at Workr Group that can support you with all aspects of compliance with IR35 and your flexible workforce.

IR35 Reform U-turn: What Does It Mean For You?

As the government issued advice on social distancing and self-isolation, and businesses across the country took drastic measures in order to keep operations moving, many were campaigning for the IR35 reform to be delayed.

And as if they listened to our prayers, on Tuesday 17th March, Chief Treasury Secretary Steve Barclay announced that the controversial measures would not go ahead in April as planned. Instead, the off-payroll working rules would be deferred until 2021 – in a bid to protect the economy from the recent coronavirus outbreak.

In this blog, we explore exactly what this U-turn means…

Deferral not a cancellation

It cannot be denied that a key reason for the delay is the coronavirus outbreak and the huge impact on the economy and workforce. While a number of changes to help the self-employed and small businesses were introduced in the Chancellor’s Budget, many are arguing that it’s not enough as UK organisations close left, right and centre.

Despite the criticism that Rishi Sunak received after not directly mentioning the rules in his speech, news of the delay will be welcomed by many. However, it’s important to remember that the decision is “a deferral, not a cancellation, and the government remains committed to reintroducing this policy”.

In short, the changes can’t be ignored and all too soon another IR35 reform deadline will be looming.

Too little too late?

While the delay offers businesses extra time to ensure they are accurately assessing the status of their contractors without the fear of HMRC sanctions, some have already made drastic changes to the way they engage with contractors. A lot of top talent have turned away as a result of blanket ban decisions.

Those contractors who have been affected by these decisions have said that too much harm has already been done. There’s also no hint of the government scrapping the IR35 reform altogether.

Industry leaders are now continuing their campaign against the legislation, fighting against zero rights employment and urging for a recognised tax system for contracting and freelancing.

What now?

To put it simply, contractors will continue to determine their IR35 status and deduct the necessary NICs and tax. While those businesses that haven’t yet brought in measures for the reform may be feeling smug, changes are still coming. And, the next 12 months offer valuable time for end clients and agencies to prepare for the reform.

The pause also means businesses and contractor freelancers can focus all of their efforts into the wider challenges that Britain is going to face over the coming weeks.

Workr Group is here to help you meet your responsibilities and maintain business as usual. And this includes market-leading accounting, personal tax and umbrella employment solutions to suit all circumstances.

So, whether you started to prepare for the 2020 deadline or not, get in touch with our team on 0208 1060 000 or drop us an email at IR35support@workrgroup.com to ensure that it doesn’t have a detrimental impact on you and your work come 2021. The alternative is that you risk losing key revenue streams, talent and your competitive advantage.

In the meantime, we have also created an IR35 Hub to help you keep updated with the proposed changes and get prepared.