HMRC IR35 Compliance Updates for Recruitment Businesses & Hiring Organisations

HMRC has recently announced new developments in their IR35 compliance checking process that may impact your recruitment business and the hiring organisations you work with.

Since the implementation of the IR35 reforms in April 2021, it has now become the end hirer’s responsibility (unless they are ‘small’) to conduct a status assessment on any contractors they work with and issue a Status Determination Statement to state whether the worker is legitimately self-employed or would be considered an employee if they weren’t working through their personal service company (PSC). These reforms were outlined by the government following the publication of “The Good Work Plan” (2017) to help HMRC battle tax avoidance and increase clarity throughout the supply chain. As you know, while the responsibility for determining the worker’s employment status is the end client’s, HMRC will look to collect any unpaid tax from the recruitment business if they make a successful challenge.

What’s Changing?

After giving some time for hirers and recruiters to get to grips with the reforms and implement new compliance processes, HMRC has recently begun a campaign of opening formal “compliance checks” on hiring organisations working with contractors. So far, these checks are being carried out on hirers in the following industries:

• Oil & gas
• Energy & renewables
• Aerospace
• Rail
• IT
• Infrastructure & construction

The purpose of these compliance checks is to allow HMRC to “support” hiring organisations in fulfilling their responsibilities under the new off-payroll reforms.

As part of the process, HMRC is sending letters to random hirers in the sectors listed above to conduct spot-checks on their compliance processes. The letters request that hirers demonstrate their compliance to IR35 by:

Supplying details on their systems and processes

• Confirming which assessment methods were employed to determine workers’ IR35 statuses e.g. whether or not HMRC’s Check Employment Status for Tax Tool (CEST) was used
• Making statistics available on how many ‘inside’ and ‘outside’ determinations were produced
• Providing details on how many PSCs were engaged either directly or via a recruitment business
• This places the onus on the end client to provide relevant paperwork and audit trails that can demonstrate they’re complying with the legislation.

Please remember: HMRC are conducting these compliance checks with various hiring organisations at random. There’s no evidence to suggest wrong-doing prior to the compliance check being opened up, but HMRC is using these checks to help identify any hirers that have done little or nothing to prepare themselves to act compliantly with the reforms.

How Will This Impact You?

Although these checks are only being conducted on hiring organisations, this may have an impact on your recruitment company.

Firstly, this may prompt questions from your clients on how you’re ensuring compliance across the supply chain and understanding the nuances of their obligations to HMRC.

Secondly, if an end client you work with is found to be operating in a non-compliant manner, this may have a financial or reputational impact on your organisation.

What Can You Do?

It’s important you understand how these changes are impacting hiring organisations you work with so you can support them to implement robust compliance services that protect them (and you) in the event of HMRC challenge or compliance checks.

To help you support your hirers, we’ve developed a new capability within our IR35 compliance support services.

Our assessment tool, IR35 Complete™ was already designed to deliver a ready-made workflow that:

• Supports you with requesting determinations for your end clients that are instant, robust, and accurate
• Automates the movement of determinations through the supply chain, saving you time, money, and resource chasing determinations and checking statuses
• Provides a complete audit trail and reasons for each determination that can act as proof you’ve taken reasonable care if you’re ever challenged by HMRC
• Provides a mechanism for dealing with assessment disputes and worker migration to suitable payment options for ‘inside’ IR35 workers, such as JSA Umbrella or other suppliers on your PSL.
• However, as HMRC increases their compliance checks on hiring organisations, we’ve continued to build on our IR35 capabilities, developing the capacity to support hiring organisations with a robust compliance service that can either be integrated with or act independently of IR35 Complete™.

Just some of the services we can help you and your hiring organisations with include:

• Auditing end client’s current processes to ensure they’re streamlined and 100% compliant
• Supporting with policy wording
• Conducting working practice reviews with hiring organisations
• Providing consultancy support on all aspects of IR35 and compliance process management
• This robust and tailored service not only better prepares and equips your clients to engage with HMRC, but also presents you with a great opportunity to further enhance and solidify your relationships with clients by demonstrating your ongoing commitment to offering the highest standards of recruitment support.

Here to Help

Click here to find out more about our IR35 Complete™ assessment tool or if you’re interested in learning more about how we can support you and your clients with all your compliance responsibilities, don’t hesitate to book a call with our IR35 Complete™ and Compliance Business Manager, Stuart Marquis, or get in touch on 07791 153 741.