The impending changes to IR35 (or off-payroll working) on 6 April 2021 will have implications for external HR consultants in terms of the clients they advise and for themselves. Whilst IR35 is a tax issue and your clients should take appropriate tax advice, there are wider employment status implications where HR guidance may be required. This means your clients need to be aware of the status of any consultants they’re engaging, while HR consultants themselves need to understand the impact of new changes to off-payroll working rules in how their services may be engaged.

Recommendations for your clients:

  • Undertake an audit, reviewing in particular the flexible workforce, the true nature of the engagements, and how the arrangements work in practice, to determine the correct employment and tax status against the terms and conditions applied to each employee/contractor/worker.
  • Provide written guidance on assessing employment status for employment purposes (so that the client can refer to this when determining contracts with individuals going forward), while recognising that employment status is different for tax status.
  • Ensure there are written agreements in place for self-employed contractors which reflect the arrangements correctly. This makes their tax status clear, and clarifies whether the engagement is of a sole trader or a limited company contractor.
  • Think about who, why, when and how the outcomes of the IR35 determinations are communicated to contractors. Other interested parties in the business will need to be involved, such as finance, supply chain, and procurement. For instance, think about who will be making the determinations, who will be making the communications, and so forth.
  • Set up an appeals process for those contractors who wish to challenge the IR35 determination they’ve been given. Consider who will sit on the panel that considers these appeals and what expertise and support they’ll need. As above, consider who is making this decision?
  • Prepare for changes to the off-payroll working rules for clients by visiting GOV.UK.

Recommendations for you:

  • Seek advice from your accountant or a tax specialist if you’re unsure on any of the guidance concerning the off-payroll regulations.
  • Review the agreements you have in place with your clients to ensure they are up to date, and that they accurately represent the relationship you have.
  • As part of your CPD, ensure that you have a good working knowledge of recent case law around employment status so you can monitor this for any changes that may affect you, as well as your clients.
  • If your clients are asking you if you would help them make determinations, or if they want you to be part of the appeals process, consider whether your professional indemnity insurance would cover making an IR35 judgment and giving tax advice.

To understand the possible consequences for in-house HR practitioners, go to IR35 implications for in-house HR practitioners.

This content was contributed by Jill Bottomley, Director at The HR Dept, Catherine Glover, Director and HR Consultant at CG Pro-Active HR Ltd, Angela Roberts (FCIPD, The HR Consultancy) and Lewis Silkin, the leading specialist employment law practice. 

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