If you work for a business who engages contractors, it’s likely you’ve been seeking information on how to prepare for the April 2021 reforms to the off-payroll (IR35) legislation.
Whilst there is a lot of information around, it can be difficult to know where to begin with your preparations. Luckily for you, we’ve compiled everything you need to know as an end-hirer to prepare for the April 2021 reforms.
Identification of workforce
Identify your off-payroll workforce in scope of the reforms. This is the total number of contractors you engage via a Personal Service Company.
Identify any genuinely outsourced services and who is responsible for determining the IR35 status of these contractors. For genuinely outsourced services this will be the service provider, unless the outsourced service provider is a small company.
IR35 assessment and strategy
Determine who in your business will assess current arrangements for each contractor and how you will do this e.g. IR35 contract review service or HMRC’s CEST tool.
Identify key projects and decide how you will deal with inside IR35 determinations here. It may be cost effective to renegotiate the rates for key contractors rather than risk losing them causing project delays.
Who will be responsible for assessing future arrangements? How will the status of the roles be determined before advertising? If you will be using role-based assessments, will there be a process for reviewing this?
Once you have identified your workforce that will be in scope of the April 2021 reform and the likely IR35 status of these contractors. Use our IR35 Business Impact Tool to calculate the financial impact of your IR35 business strategy.
Communication and training
Train your relevant internal resource on IR35 and the impact of the April 2021 reforms. We are happy to support you with this.
Start talking to your contractors about whether the off-payroll rules apply to their role and the options that will be available to them post April 2021. Communication here is key to avoid walk outs. Develop a communications plan to ensure your contractors understand changes to IR35 and how it may affect them depending on if they’re ‘inside’ or ‘outside’ the legislation.
As the end hirer you have a responsibility to take reasonable care when making status determinations and to communicate this Status Determination Statement to your contractor directly and to the first agency in your supply chain. Establish how this will be communicated. How will this be documented?
Put processes in place to determine if the off-payroll rules apply to future engagements - these might include who in your organisation should make a determination and how they will be supported.
Consider how payments will be made to contractors inside IR35, work with your agency partners to confirm who will carry the tax liability. This will be the ‘Fee Payer’.
Consider how you will manage the client led disagreement process. What controls will you have in place to ensure that any representations from the fee payer or end hirer are responded to within 45 days?
Review internal systems, such as payroll software, process maps, HR and onboarding policies to see if they need to make any changes. How many contractors do you engage directly? Will your payroll systems be able to make deductions on the invoice payments to inside IR35 contractors? Are your systems able to issue the payslips and make the relevant RTI submissions to HMRC? Or will you outsource this to an umbrella solution. Parasol can help with this.
Audit your supply chain. With the inclusion of debt transfer provisions in the April 2021 reforms it is more important than ever before that you are completing due diligence on
all parties in the supply chain.
How can Parasol help
A market leader in compliance and founding member of the FCSA, at Parasol we’ve been supporting end-hirers, recruitment agencies and contractors navigate the industry since 2000 so know a thing or two. Get in touch with our agency support team to discover how our expert team can help you to navigate the IR35 reforms.