The brand-new Chancellor, Jeremy Hunt, announced that the off payroll working (IR35) guidelines presented from April 2021 (6 April 2017 for the general public sector) are to continue unchanged in a turnaround of the proposed repeal announced by the previous Chancellor, Kwasi Kwarteng. On the basis that the guidelines won't alter, now is a great time to examine the level of your compliance with IR35 responsibilities. Particularly as the HMRC 'light touch' approach to penalties for mistakes that were not intentional ended on 5 April 2022, and HMRC is stepping up its compliance activity. Recap on IR35 commitments Under the rules presented from 6 April 2021, medium or large-sized organisations in the personal and 3rd sectors (omitting those that are "wholly overseas") have the duty for choosing whether arrangements with 3rd party intermediaries such as Personal Service Companies (PSC) do in fact represent a disguised employment. Where an arrangement is considered to be 'inside IR35' on the basis that it is a disguised employment, then the fee payer is accountable for operating PAYE/NIC on payments, including employer NIC, and where appropriate the apprenticeship levy. The customer utilizing the services of the worker operating through an intermediary such as a PSC is likewise needed to meet other responsibilities. For example, when the client has used affordable care and has identified whether the off payroll working guidelines use to an engagement, it is required to communicate that choice in the kind of a Status Determination Statement (SDS). It is also essential for the client using the services to provide a status difference process to handle any disagreements regarding the SDS and react within 45 days. Where the client is defined as a small company by the Companies Act 2006, obligation for evaluating the arrangements, and applying IR35 where necessary, will remain with the workers intermediary such as the PSC. Common issues and misunderstandings on off payroll working within the social housing sector Now that the IR35 intermediaries guidelines have remained in location for over 18 months, our tax consultants, RSM, are seeing some recurring concerns and misunderstandings within the sector around the rules, consisting of: Obligations with regard to PSC versus obligations with regard to self-employed individuals Whilst employment status tests for employees offering services to a customer by means of their own intermediary such as a PSC are the very same as status tests for self-employed employees who are not operating through a PSC, the obligations that you have in relation to each differ and we frequently see confusion around this. As above, responsibilities, and danger, in relation to making use of PSCs by a medium or large customer use from 6 April 2021 only, whereas your commitment to identify whether a self-employed worker is genuinely self-employed for tax purposes have remained in place for numerous years under different rules. Where you are utilizing the services of a PSC, then you are needed to verify your status assessment in a formal SDS and use a status dispute procedure. An official SDS does not need to be provided when a self-employed individual is working for you, although ou should still assess whether or not they are really self-employed, and you ought to keep a record of this. If the status of a self-employed worker who is not operating through a PSC is evaluated and it is figured out that they have the functions of employment, then they need to be treated as an actual staff member for both PAYE/NIC and work rights purposes. Where a PSC worker is determined as 'inside IR35' then they are dealt with as a 'considered employee' for PAYE/NIC functions only and do not instantly have worker status for rights such as pension auto-enrolment. Employment status and the Construction Industry Scheme (CIS) Many housing associations engage with off payroll sub-contractors who are paid by means of the CIS. It is very important to emphasise that commitments in relation to evaluating employment status and IR35 should be undertaken for sub-contractors as they are for any off-payroll worker. It is just once you have actually figured out that the off-payroll worker is outdoors IR35/genuinely self used that you can pay to them under the CIS. In this respect it is typically overlooked that each month-to-month CIS professional return needs a declaration to be finished confirming that the employment status of each individual consisted of on the CIS return has actually been considered and it has been confirmed that they are not in fact a staff member or deemed employee. Obligations where workers are sourced by means of a recruitment firm Just like numerous other organisations, housing associations typically source momentary workers through 3rd parties such as recruitment agencies. In this scenario payments are made to the recruitment company, but it is essential to obtain confirmation from the firm on a worker-by-worker basis regarding whether or not the worker is subject to PAYE/NIC by the firm. If the recruitment firm is contracting with an employee operating via an intermediary such as a PSC and onwardly providing them, then the housing association as the client (i.e the end user of the employee's services) has IR35 obligations, unless it is a small company as specified by the Companies Act 2006. Importantly, the housing association must consider the status of the employee and release a SDS to both the company that it contracted with and the worker. Failure to fulfill this obligation can lead to the housing association ending up being accountable for any PAYE/NIC due. Due diligence on the labour supply chain is also crucial because, beyond IR35, there can be other tax and/or reputational dangers if the employee is engaged by a party in the labour supply chain who is not properly operating PAYE. For example, where the worker is working for a customer in the UK, but is engaged by a party in the labour supply chain based beyond the UK who is not running In summary, in the meantime a minimum of, the off payroll working rules are here to stay and HMRC are stepping up their compliance activity following the end of the 'light touch' year for penalties. All housing associations must periodically examine their compliance in the prominent area of work status. Our tax advisors RSM work with many housing associations and other organisations with regard to their obligations under the off payroll working rules and would be pleased to assist with any questions. For an initial discussion please contact David Williams-Richardson. The Chancellor revealed that the off payroll working guidelines introduced from April 2021 are to continue. Now is an excellent time to inspect the level of your compliance with IR35 responsibilities.