IR35 for End Clients
IR35 for end clients
Subject to any relevant exemptions, the responsibility for determining whether a contractor’s assignment is inside or outside IR35 transferred from the contractor to the end client who receives the contractor’s services. Likewise, the responsibility for deducting and paying tax moved to the fee-payer, usually the party closest in the chain to the contractor’s Personal Service Company (PSC), typically an agency or umbrella company.
As a result, all parties now need to be open and transparent in order to ensure compliance with tax and legal regulations.
Key questions for end clients
We outline some key areas that need to be determined before you take on contractors.
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Delivering status determination statements (SDS)
A status determination statement should be delivered for every assignment and a copy held by all parties. There are a number of areas to be considered, and while a larger company may have the skills in-house to deliver the SDS using reasonable care, smaller companies would be advised to seek external counsel to ensure they comply with HMRC guidelines.
As a start, we’ve put together a checklist of key points for end clients to consider.Read our guide here
HMRCs ‘light touch’
I understand that HMRC have said they will take a ‘light touch’ approach following the implementation of off-payroll. What does this mean?
HMRC has indicated that: “You will not have to pay penalties for inaccuracies relating to the off-payroll working rules in the first 12 months of the operation of the new rules unless there’s evidence of deliberate non-compliance. We will not charge a penalty if you took reasonable care to apply the off-payroll working rules correctly but still made a mistake, including making mistakes in status determinations.” However, that grace period ended on 6 April 2022. Supply chains are reminded not to rely on only one or two of the key IR35 factors in insolation (i.e. including mutuality of obligation, control, and the level of personal service (such as the right of substitution) when making IR35 determinations. Pursuant to recent case law, whilst those factors may be present, the assessment should be made looking at all of the facts and circumstances in the case i.e. looking at ‘the whole picture’.
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