The brand-new Chancellor, Jeremy Hunt, announced that the off payroll working (IR35) guidelines presented from April 2021 (6 April 2017 for the public sector) are to continue unchanged in a reversal of the proposed repeal revealed by the previous Chancellor, Kwasi Kwarteng. On the basis that the guidelines will not alter, now is a great time to check the level of your compliance with IR35 commitments. Particularly as the HMRC 'light touch' method to penalties for inaccuracies that were not intentional ended on 5 April 2022, and HMRC is stepping up its compliance activity. Recap on IR35 responsibilities Under the rules presented from 6 April 2021, medium or large-sized organisations in the personal and 3rd sectors (leaving out those that are "entirely overseas") have the duty for whether arrangements with 3rd party intermediaries such as Personal Service Companies (PSC) perform in truth represent a disguised employment. Where an arrangement is deemed to be 'inside IR35' on the basis that it is a disguised employment, then the fee payer is responsible for running PAYE/NIC on payments, consisting of employer NIC, and where relevant the apprenticeship levy. The client using the services of the employee operating through an intermediary such as a PSC is also needed to meet other responsibilities. For instance, when the client has applied affordable care and has actually identified whether the off payroll working guidelines use to an engagement, it is needed to interact that decision in the type of a Status Determination Statement (SDS). It is also essential for the customer utilizing the services to provide a status difference process to deal with any disputes regarding the SDS and react within 45 days. Where the customer is defined as a little business by the Companies Act 2006, responsibility for examining the arrangements, and applying 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 actually remained in place for over 18 months, our tax advisers, RSM, are seeing some repeating issues and misconceptions within the sector around the rules, including: Obligations with regard to PSC versus obligations with regard to self-employed individuals Whilst work status tests for workers offering services to a client by means of their own intermediary such as a PSC are the very same as status tests for self-employed workers who are not operating via a PSC, the responsibilities that you have in relation to each vary and we frequently see confusion around this. As above, commitments, and risk, in relation to the use of PSCs by a medium or large customer use from 6 April 2021 only, whereas your responsibility to identify whether a self-employed worker is truly self-employed for tax purposes have actually been in place for numerous years under different rules. Where you are using the services of a PSC, then you are required to verify your status assessment in a formal SDS and provide a status difference process. An official SDS does not require to be issued when a self-employed individual is working for you, although ou needs to still assess whether or not they are truly self-employed, and you ought to keep a record of this. If the status of a self-employed worker who is not running through a PSC is evaluated and it is determined that they have the features of work, then they should be dealt with as a real employee for both PAYE/NIC and work rights purposes. Where a PSC worker is identified as 'inside IR35' then they are treated as a 'deemed employee' for PAYE/NIC functions only and do not immediately 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 essential to emphasise that commitments in relation to evaluating work status and IR35 need to be carried out for sub-contractors as they are for any off-payroll worker. It is just when you have figured out that the off-payroll worker is outdoors IR35/genuinely self employed that you can pay to them under the CIS. In this regard it is often neglected that each regular monthly CIS specialist return needs a statement to be finished confirming that the employment status of each individual included on the CIS return has actually been considered and it has been confirmed that they are not in truth a worker or considered employee. Obligations where workers are sourced via a recruitment firm Similar to numerous other organisations, housing associations often source short-term workers via third celebrations such as recruitment companies. In this situation payments are made to the recruitment company, however it is very important to get verification from the agency on a worker-by-worker basis regarding whether the employee is subject to PAYE/NIC by the firm. If the recruitment firm is contracting with an employee operating by means of an intermediary such as a PSC and onwardly offering them, then the housing association as the customer (i.e the end user of the employee's services) has IR35 responsibilities, unless it is a small company as defined by the Companies Act 2006. Importantly, the housing association need to consider the status of the worker and provide a SDS to both the firm that it contracted with and the employee. Failure to satisfy this obligation can lead to the housing association ending up being liable for any PAYE/NIC due. Due diligence on the labour supply chain is likewise essential because, outside of IR35, there can be other tax and/or reputational threats if the employee is engaged by a party in the labour supply chain who is not properly operating PAYE. For example, where the worker is working for a customer in the UK, but is engaged by a celebration in the labour supply chain based beyond the UK who is not running In summary, in the meantime a minimum of, the off payroll working rules are here to remain and HMRC are stepping up their compliance activity following the end of the 'light touch' year for charges. All housing associations should occasionally examine their compliance in the prominent location of work status. Our tax consultants RSM work with many housing associations and other organisations with regard to their responsibilities under the off payroll working rules and would be pleased to help with any questions. For an initial conversation please contact David Williams-Richardson. The Chancellor revealed that the off payroll working rules presented from April 2021 are to continue. Now is a great time to inspect the level of your compliance with IR35 obligations.