IR35 & Tax Risk Services
Understand & mitigate your organisation’s contingent workforce risks
Know Your Obligations
Flexible workforces enable your organisation to tap into the right talent at the right time but there is inherent risk.
The compliance landscape for contingent labour supply chains is complex and ever-changing. As experts in this field, we can help you understand and mitigate risk, protecting your business from financial and reputational damage.
Our role is to ensure you are fully aware of the compliance issues that apply to your organisation and help you work out the right way to mitigate risk whilst balancing your commercial needs. Below we outline the key pieces of legislation that apply to labour supply chains.
IR35
Off-payroll legislation affects all stakeholders of the labour supply chain – the risks, liabilities, and financial consequences can be significant.
- Affecting both public and private sector contractors, the rules are designed to determine employment status for tax purposes.
- Ensures that when a contractor provides services using a PSC in a manner that is more akin to employment, they and their deemed employer pay the correct amount of tax.
- Risk can be mitigated through the deployment of proven frameworks and solutions to ensure the ‘reasonable care’ test is met and genuinely compliant status determinations and contractual and working practices are enforced.
- IR35 Complete™is our market-leading status determination tool that delivers reliable assessments and a transparent audit trail.
Criminal Finance Act 2017
HMRC expects end users and staffing companies to carry out due diligence on their staffing supply chains to try to prevent tax avoidance (and tax evasion) in supply chains and has better tools than in the past to attack organisations whose supply chains are involved in what it sees as bad practices. In many cases, it will be no defence that the organisation did not know what was being done – HMRC expects proper due diligence to find out.
- Because the legislation covers the businesses and individuals involved in the payment of temporary workers, it means all members of the supply chain are at risk.
- Common pitfalls include the determination of self-employment, the use of complex engagement models and the processing of expenses for Umbrella employees.
- Risk can be mitigated through the simplification of the supply chain for greater transparency alongside robust, auditable compliance practices that do not waver over time.
Travel & Subsistence
This legislation affects all agency & umbrella workers (not PSCs) and restricts their ability to get tax relief at source on their T&S costs unless it can be shown they are not subject to supervision, direction or control (SDC).
-
- HMRC has stated that it will assume that all agency and umbrella workers are subject to SDC unless the agency or umbrella company has gathered evidence to the contrary.
- If an umbrella worker is found to be claiming expenses where they are under SDC then the employment intermediary operating the T&S scheme is liable. Liability may fall on the agency and/or the client where fraudulent documents have been provided.
- This underlines the importance of working with a compliant Umbrella, like Workwell.
MSC Legislation
MSC legislation (Chapter 9 ITEPA 2003) was introduced in April 2007 and means there is risk if you or your supply chain have actively encouraged contractors to work via PSCs.
- Accountants are not an MSC if they are merely providing accountancy services in a professional capacity. However, where an accountant/adviser strays too far outside of its professional remit of providing services and step into “promotion” or “facilitation” of companies for the provision of services of individuals they could become a MSC.
- The Transfer of Debt provision is very strong, if the liability cannot be recovered from the ‘MSC’ then the liability automatically flows down the supply chain to agency then end client.
- This highlights the need to work with a provider such as Workwell who understands the legislation and acts compliantly.
Onshore Employment Intermediaries 2014
The Agency Legislation, also referred to as S44, aims to tackle false self-employment and means that, should a worker be deemed an employee, the agency will be responsible for deducting the PAYE and NIC from all the income earned by the worker. The main factors that determine status are:
- The worker is not subject to supervision, direction or control
- Where a worker is engaged by or through an employment business then there will be a presumption that there is supervision, direction and control over the worker and it will be up to the employment intermediary to prove otherwise.
- Liability for non compliance will sit with the agency and where an intermediary has been used for payroll and compliance purposes. There may be instances where the end client is liable, in such instances where information that contributes to an out-of-scope status has been provided fraudulently.