IR35 / Off-payroll Workers

What is IR35?

The off-payroll rules have been in place since 2000 to make sure that individuals who work “like employees” pay the same tax and National Insurance Contributions (NIC) as employees. The rules required that individuals/contractors working through a qualifying intermediary such as their own limited company (PSC) or a Limited Liability Partnership (LLP) self-assess themselves for the purposes of the rules as inside or outside IR35. This was not effective and from April 2017 the public sector was required, where it was an end user of the services, to assess if the rules applied.

As of 6^th April 2020, the legislation is being extended again to require all medium and large-sized private sector companies (as well as the public sector) to bear the responsibility of determining whether an individual working through an intermediary is working for them in a relationship akin to that of an employee. Where the worker is engaged through an agency it will still be the end user responsibility to establish this and make a status determination.

Determining IR35 scope varies by client and placement. The new rules include requirements that:

The ‘end-user’ must determine if the rules apply (and certain conditions of liability are met).
Provide the contractor and any third party they contract with, such as a recruitment agency, with a status determination statement (SDS) setting out the reasons for their assessment
The end user must have a disagreement/appeal process which meets the statutory requirements so workers or a fee payer can challenge the status determination. End users will need to respond to any appeals to their status determinations within 45 days of receipt.

RSM have provided a seminar to our clients covering what is IR35, the main challenges as clients and how payroll fits into IR35. You can watch the seminar in full below.

What is an Off-Payroll Worker?

Off-payroll workers are contractors working through intermediaries that end users need to check and who may be in scope of the IR35 legislation. Where a status check is undertaken, and they are deemed inside IR35/a deemed employee the off-payroll worker flag needs to be placed on payroll for Tax and National insurance deductions. For more information please refer to Understanding off-payroll working IR35

RSM and IR35

Whilst the RSM InTime Support Team cannot provide advice as to whether a worker is off-payroll or any legislative advice relating to IR35, RSM's employer solutions or legal specialists are able to offer guidance on managing IR35 compliance.

In addition to this, RSM offers a compliance software solution. Insight4GRC™ is a governance, risk and compliance software (GRC) suite providing management teams with the critical tools needed to be more effective. It enables the monitoring and controlling of the OPW population and actions required for compliance. As well as enabling the tracking and acceptance of employee awareness of the organisations policies and procedures.

Please visit the Insight4GRC site for more information on our services and how to get in touch with our IR35 specialists at RSM. You can find a short video on how RSM and Insight4GRC can help your organisation with IR35 below.

RSM InTime and IR35

For information on how to process IR35 contractors through RSM InTime and InPay, please refer to our guide here.

Please note: RSM InTime only clients will not be able to process IR35 contractors. RSM InTime does not have functionality which allows the calculation of tax, NI deductions and there is no connection to the HMRC gateway for FPS, RTI and EPS submissions. RSM offers integration with InPay to allow clients full IR35 compliance and seamless payroll processing between both systems. Please contact the Client Account team accountmanagement.esl@rsmuk.com for more information.

How do I check the status of a worker?

This responsibility falls on the end user of the services, as a fee payer/agency the end user should pass on the status determination statement (SDS), where you are the first/only agency you have the right to appeal the SDS along with the contractor. For more information on this, please see HMRC's internal employment status manual.

HMRC has an employment status tool Check Employment Status for Tax (CEST) for further guidance.