The brand-new Chancellor, Jeremy Hunt, announced that the off payroll working (IR35) rules introduced from April 2021 (6 April 2017 for the general public sector) are to continue unchanged in a turnaround of the proposed repeal revealed by the previous Chancellor, Kwasi Kwarteng. On the basis that the guidelines will not change, now is a great time to examine the level of your compliance with IR35 obligations. Particularly as the HMRC 'light touch' method to penalties for inaccuracies that were not purposeful ended on 5 April 2022, and HMRC is stepping up its compliance activity. Recap on IR35 commitments Under the rules introduced from 6 April 2021, medium or large-sized organisations in the personal and 3rd sectors (omitting those that are "completely abroad") have the duty for choosing whether arrangements with third party intermediaries such as Personal Service Companies (PSC) carry out in reality represent a disguised work. Where an arrangement is deemed to be 'inside IR35' on the basis that it is a disguised work, then the cost payer is accountable for running PAYE/NIC on payments, consisting of employer NIC, and where applicable the apprenticeship levy. The customer utilizing the services of the worker operating via an intermediary such as a PSC is also required to fulfill other obligations. For example, as soon as the client has used affordable care and has identified whether the off payroll working rules use to an engagement, it is required to interact that choice in the kind of a Status Determination Statement (SDS). It is likewise necessary for the customer using the services to use a status dispute process to handle any conflicts concerning the SDS and react within 45 days. Where the customer is defined as a small company by the Companies Act 2006, responsibility for assessing the plans, and using IR35 where necessary, will stay 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 rules have been in location for over 18 months, our tax advisors, RSM, are seeing some recurring problems and misunderstandings within the sector around the rules, consisting of: Obligations with regard to PSC versus commitments with regard to self-employed people Whilst work status tests for workers offering services to a customer through their own intermediary such as a PSC are the very same as status tests for self-employed employees who are not running by means of a PSC, the obligations that you have in relation to each differ and we typically see confusion around this. As above, commitments, and danger, in relation to making use of PSCs by a medium or big client apply from 6 April 2021 just, whereas your commitment to figure out whether a self-employed worker is really self-employed for tax functions have actually remained in location for several years under separate rules. Where you are using the services of a PSC, then you are needed to verify your status assessment in a formal SDS and use a status dispute procedure. A formal SDS does not require to be issued when a self-employed individual is working for you, although ou must still examine whether they are really self-employed, and you ought to keep a record of this. If the status of a self-employed employee who is not running through a PSC is assessed and it is identified that they have the functions of work, then they must be dealt with as an actual worker for both PAYE/NIC and work rights functions. Where a PSC employee is figured out as 'inside IR35' then they are treated as a 'considered employee' for PAYE/NIC functions just 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 via the CIS. It is very important to stress that commitments in relation to assessing employment status and IR35 should be undertaken for sub-contractors as they are for any off-payroll employee. It is just when you have actually determined that the off-payroll worker is outside IR35/genuinely self utilized that you can make payments to them under the CIS. In this respect it is typically ignored that each monthly CIS contractor return requires a declaration to be finished confirming that the work status of each private included on the CIS return has been thought about and it has actually been confirmed that they are not in reality a staff member or considered worker. Obligations where employees are sourced via a recruitment company Just like lots of other organisations, housing associations often source momentary workers via third parties such as recruitment companies. In this scenario payments are made to the recruitment company, however it is essential to get confirmation from the agency on a worker-by-worker basis as to whether the employee undergoes PAYE/NIC by the agency. If the recruitment company is contracting with an employee operating through an intermediary such as a PSC and onwardly providing them, then the housing association as the client (i.e the end user of the worker's services) has IR35 commitments, unless it is a small company as specified by the Companies Act 2006. Importantly, the housing association should think about the status of the worker and issue a SDS to both the agency that it contracted with and the worker. Failure to satisfy this responsibility can result in the housing association ending up being responsible for any PAYE/NIC due. Due diligence on the labour supply chain is likewise crucial due to the fact that, outside of IR35, there can be other tax and/or reputational risks if the employee is engaged by a celebration in the labour supply chain who is not properly operating PAYE. For instance, where the worker is working for a client in the UK, but is engaged by a party in the labour supply chain based outside of the UK who is not operating In summary, in the meantime at least, the off payroll working guidelines are here to remain and HMRC are stepping up their compliance activity following completion of the 'light touch' year for charges. All housing associations need to periodically review their compliance in the prominent location of employment status. Our tax advisors RSM work with lots of housing associations and other organisations with regard to their responsibilities under the off payroll working guidelines and would be pleased to assist with any inquiries. For an initial discussion please connect with David Williams-Richardson. The Chancellor revealed that the off payroll working guidelines presented from April 2021 are to continue. Now is a great time to check the level of your compliance with IR35 commitments.