IR35 Checklist for Agencies and Hiring Managers

IR35 checklist for agencies and end users to manage reform

Off-payroll working rules have been extended to the private sector. Analysis will give you a view of your current contractor processes and an indication of the IR35 status of your PSC workers, giving you the opportunity to consider any scope for optimising your business processes for IR35 compliance.

The following checklist provides you with a starting point to assess your current situation and evaluate the processes needed to comply with the rules. Qdos provide auditing services for businesses preferring an independent expert to assess their situation and provide guidance bespoke to their business.

Assessing your business

Taking steps to understand your contractor workforce from an IR35 perspective is imperative to help you build a process for managing the reform.

1. Identify your contingent workforce.
a. How many are PSCs (personal service companies)?
b. Can these PSCs be grouped into the same/similar services?

2. Identify the provision of any managed/outsourced services.

3. Identify who is responsible for making decisions on the employment status of your off-payroll workers.
a. Agency
b. Client
c. Other

4. Identify who will carry the tax liability (this will be the fee-payer).
a. Agency
b. Client
c. Other

5. Identify the different contractual chains (for end clients).
a. All direct hires
b. All engaged via recruitment agencies
c. Mixture of direct hires and those engaged through recruitment agencies

Your processes

It is important to consider existing processes and systems as early as possible to ensure you are equipped with the appropriate tools.

6. Establish how the facts of each engagement will be assessed on a case-by-case basis (applicable party in chain).
a. HMRC’s CEST
b. Qdos Status Review service
c. Combination of CEST and Qdos Status Review
d. Other service/internal assessments

7. Establish process for communication between recruiters and hiring managers.
a. How will the end client communicate their determination to the recruiter?
b. How will the recruiter ensure they receive determinations from all of their end clients?
c. How will a role be assessed, and by who, before advertising?

8. Review payroll processes and how these could be applied for contingent workers operating inside IR35 (applicable to the fee-payer which is usually the recruitment agency).
a. Do you have existing payroll systems for deducting the relevant tax and National Insurance contributions?
b. Are existing payroll systems suitable for managing a contingent workforce?
c. Are you equipped to issue payslips to contractors operating inside IR35?

9. Consider how the information is going to be compiled and reported upon.
a. How will you maintain a record of determinations made (to applicable party in chain)? Qdos Status Review includes immediate download of all determinations made via the system.
b. How will you prove payments made to contractors (fee-payer)?

It is crucial to keep a record of payments that are made to contractors, which will need to be reported to HMRC using a Full Payment Submission, similar to that of PAYE workers, and keep a record of deductions on a deductions working sheet.

Other

10. Avoid walkouts by liaising with PSC workforce

It is key to ensure that those who are operating through their own Personal Service Companies (PSCs) are liaised with and are aware of the changes. Consistent and relevant dialogue is crucial to ensure there are no walkouts, as experienced in the public sector, and both parties involved are fully aware of the decisions that are made, and how they are made.

11. Train relevant internal resource on IR35

In order to effectively determine each status correctly, it is important for the relevant resources to be trained on IR35, so that they are capable of following the rules. Each engagement should be reviewed on its own merit and making ‘blanket’ decisions must be avoided. Whilst there may be similarities in the delivery of services within certain groups of workers, there should still be a considered assessment undertaken.