IR35 contractor compliance
  • Publish Date: Posted over 1 year ago
  • Author:by Katie Ball

Is your Business protected? How to Ensure Compliance in the Supply Chain amidst HMRC's £161 Million Investment

The HMRC are looking to invest £161 million into the private sector to investigate claims, which will ,in part, focus on compliance within the supply chain. With this in mind, ensuring your compliance procedures are robust and can stand up to scrutiny is essential.Recently, we had the opportunity to attend a webinar run by Brookson One’s legal team on the topic of HMRC Letters and Investigations. Brookson One are an FCSA accredited umbrella company who provide financial support to contractors without the stress of running a limited company, amongst other services such limited company accountancy services. The webinar focused on providing an understanding on how to prepare for a potential investigation by the HMRC. In this webinar, Brookson conducted a survey, of which 10% of those asked said they, or their end clients had received a letter from the HMRC, which indicates that the HMRC are starting to seriously conduct their compliance checks with end clients. With the new rules coming into effect 2 years ago now, it was always likely that the HMRC would start conducting, and investing in, compliance activity. This has come in the form of letters sent to the end clients to ensure they are complying with the new rules. This letter is 18 pages long and requests relatively quick response times. The end client has 7 days to acknowledge receipt of the letter, and 28 days to complete the information required and to schedule a meeting with the HRMC. Examples of information the HMRC may request are –The Hiring Process for engaging contractorsYour end client’s end-to-end process of performing employment status checks of such contracts and the process and timeframe for performing reassessmentsHow many contractors your end client’s are engaging withPercentage split between Inside IR35 contractors and Outside IR35 contractors Process for deciding if any outsourced services are fully contracted outThe HMRC will then review the information provided and provide their outcome within 2 weeks. If the HMRC are satisfied with the responses, the compliance check will be closed down. If the HMRC have determined non-compliance, an investigation will be opened, and the fee payer could end up owing the HRMC unpaid taxes, NI and Apprenticeship Levy. The amount payable would be determined through their investigation. If the end client has not taken reasonable care when issuing the Status Determination Statement, then the liability for any fees and penalties would revert to the client rather than the employment agency fee payer. Where the HMRC does apply penalties, the penalties will be based on a percentage of the tax owed and levied against behaviour, from ‘carless’ to ‘deliberate non-conformance.’ If you are deemed to have been careless and it’s your first offence, you can apply to have your penalty waived.54% of those in the Brookson webinar said they were worried about IR35 liabilities, which isn’t surprising as this is unchartered waters for companies. Therefore, how your organisation conducts their IR35 compliance is imperative. There are various tools on the market, with 32% saying they rely on the HMRC Check Employment Status for Tax tool, 25% said they rely on external legal expertise, and 40% said they utilise a third party tool to help assist determining status. Whilst utilising the HMRC Check Employment Status for Tax tool can be useful, it would definitely be worth utilising another third party tool to help determine status, because as we know.Not only is IR35 Compliance a consideration, the HMRC will also be conducting investigations into tax avoidance schemes. This is particularly prevalent when a contractor has been caught inside IR35 and has chosen to utilise an umbrella company. Not all umbrella companies have been set up legitimately and their purpose is to ensure the most amount of tax relief is applied as possible, which can include tax relief on expenses for example. All companies are required to abide by the Criminal Finances Act, and paying a company listed on the named tax avoidance schemes, promoters, enablers and suppliers list could lead to not only reputational damage, but fines and penalties for the fee-payer in the chain. The worker may also be worse off because of non-compliant practises and the end client could end up footing the bill if you are unable to pay the fines. It is worth noting that as part of the Finance Bill, names can only be kept on the named tax avoidance schemes, promoters, enablers and suppliers list for 12 months, so the first names have now been removed. Adding a check of this list into your Compliance process before making monthly payments would be useful to help reduce the risk of making payments to any companies on this list. Businesses are at risk of criminal convictions if supply chain compliance is not met. If compliance is not met, businesses become liable under the Criminal Finances Act.Gerrard White has a dedicated compliance team which manages all compliance requirements. If you would like to find out more, please get in touch and we will be happy to discuss your needs.01892 553355 | info@gerrardwhite.com

Share this Article
Back to Blogs

The HMRC are looking to invest £161 million into the private sector to investigate claims, which will ,in part, focus on compliance within the supply chain. With this in mind, ensuring your compliance procedures are robust and can stand up to scrutiny is essential.

Recently, we had the opportunity to attend a webinar run by Brookson One’s legal team on the topic of HMRC Letters and Investigations. Brookson One are an FCSA accredited umbrella company who provide financial support to contractors without the stress of running a limited company, amongst other services such limited company accountancy services. The webinar focused on providing an understanding on how to prepare for a potential investigation by the HMRC.

In this webinar, Brookson conducted a survey, of which 10% of those asked said they, or their end clients had received a letter from the HMRC, which indicates that the HMRC are starting to seriously conduct their compliance checks with end clients. With the new rules coming into effect 2 years ago now, it was always likely that the HMRC would start conducting, and investing in, compliance activity. This has come in the form of letters sent to the end clients to ensure they are complying with the new rules.

This letter is 18 pages long and requests relatively quick response times. The end client has 7 days to acknowledge receipt of the letter, and 28 days to complete the information required and to schedule a meeting with the HRMC. Examples of information the HMRC may request are –

  • The Hiring Process for engaging contractors

  • Your end client’s end-to-end process of performing employment status checks of such contracts and the process and timeframe for performing reassessments

  • How many contractors your end client’s are engaging with

  • Percentage split between Inside IR35 contractors and Outside IR35 contractors

  • Process for deciding if any outsourced services are fully contracted out

The HMRC will then review the information provided and provide their outcome within 2 weeks. If the HMRC are satisfied with the responses, the compliance check will be closed down.

If the HMRC have determined non-compliance, an investigation will be opened, and the fee payer could end up owing the HRMC unpaid taxes, NI and Apprenticeship Levy. The amount payable would be determined through their investigation. If the end client has not taken reasonable care when issuing the Status Determination Statement, then the liability for any fees and penalties would revert to the client rather than the employment agency fee payer.

Where the HMRC does apply penalties, the penalties will be based on a percentage of the tax owed and levied against behaviour, from ‘carless’ to ‘deliberate non-conformance.’ If you are deemed to have been careless and it’s your first offence, you can apply to have your penalty waived.

54% of those in the Brookson webinar said they were worried about IR35 liabilities, which isn’t surprising as this is unchartered waters for companies. Therefore, how your organisation conducts their IR35 compliance is imperative. There are various tools on the market, with 32% saying they rely on the HMRC Check Employment Status for Tax tool, 25% said they rely on external legal expertise, and 40% said they utilise a third party tool to help assist determining status. Whilst utilising the HMRC Check Employment Status for Tax tool can be useful, it would definitely be worth utilising another third party tool to help determine status, because as we know.

Not only is IR35 Compliance a consideration, the HMRC will also be conducting investigations into tax avoidance schemes. This is particularly prevalent when a contractor has been caught inside IR35 and has chosen to utilise an umbrella company.

Not all umbrella companies have been set up legitimately and their purpose is to ensure the most amount of tax relief is applied as possible, which can include tax relief on expenses for example.

All companies are required to abide by the Criminal Finances Act, and paying a company listed on the named tax avoidance schemes, promoters, enablers and suppliers list could lead to not only reputational damage, but fines and penalties for the fee-payer in the chain. The worker may also be worse off because of non-compliant practises and the end client could end up footing the bill if you are unable to pay the fines.

It is worth noting that as part of the Finance Bill, names can only be kept on the named tax avoidance schemes, promoters, enablers and suppliers list for 12 months, so the first names have now been removed. Adding a check of this list into your Compliance process before making monthly payments would be useful to help reduce the risk of making payments to any companies on this list. Businesses are at risk of criminal convictions if supply chain compliance is not met. If compliance is not met, businesses become liable under the Criminal Finances Act.

Gerrard White has a dedicated compliance team which manages all compliance requirements. If you would like to find out more, please get in touch and we will be happy to discuss your needs.

01892 553355 | info@gerrardwhite.com

Latest Blogs

View All Blogs
Legal Firm   John Copeland & Sons Case Study
Case Study | Overcoming Recruitment Challenges with a Tailored Legal Hiring Solution

John Copland and Son, a small, traditional law firm deeply rooted in the Sheerness community since 1867, faced a business critical recruitment challenge. As a family-run business spanning six gener...

Image   Ir35 Compliance
IR35 Contractor Audit: Do you know your risks of non-compliance?

​If your business relies on contractors to fill critical roles, ensuring IR35 compliance is no longer just a tax issue - it’s a major operational and financial risk. As a recruitment agency, Gerrar...

Insurance Offices
An Insurance Recruitment Agency’s Perspective on the Vibrant World of Insurance

​When most people think of a career in the insurance industry, they often imagine stacks of paperwork, policy jargon, and the misconception that it’s a “boring” field. But here’s the truth: the ins...

Insurance Broking
Gerrard White Consulting: Broking Recruitment Specialists

​As a recognised and trusted leader in insurance recruitment, Gerrard White helps insurance companies find top professionals across all areas of insurance, including claims, broking, technology, u...

Legal Recruiitment Consulting
How Legal Recruitment Consulting Can Help Build Strong Teams

​Building a strong and efficient legal team is crucial for any law firm's success. At Gerrard White Consulting, we understand the competitive nature of the legal landscape and know that securing to...

Modernising Technology
The Importance of Modernising Legacy Systems in the UK Insurance Industry

​In an era defined by digital transformation, the UK insurance industry is facing increasing pressure to modernise its legacy systems. These systems, often decades old, are struggling to keep up w...

Insurance Recruiters
Case Study: Building a European IT function for a Global Insurance Broker

A Global Insurance Broking and Risk Management organisation built a new IT model to support their acquisitive growth plans. This included a major technology overhaul to align UK operations with the...

Legal Case Study
Case Study: Swift and effective recruitment of HR Manager for leading Legal Firm

A leading Legal 500 firm, faced a critical HR challenge when their HR Manager decided to leave for a new opportunity outside of HR and law. They needed a replacement quickly to ensure a smooth tran...

Managed Service Provision (MSP)
5 Signs Your Business Needs a Managed Service Provider (MSP)

​In today’s fast-paced business environment, companies face increasing challenges in managing their workforce and operations efficiently. Without the right systems in place, businesses can struggle...

Talent Trends
Talent Trends Report - August 2024

​August Talent Trends Report focuses on the hiring headlines from the latest S&P Global REC/ONS Report.Our August Talent Trends Report analyses the key findings from the latest S&P Global REC/ONS R...

Legal Jobs
How to land your dream job in law: A step-by-step guide

​If you're looking to pursue a career in law, you're likely keen to understand how to navigate the competitive legal job market. Whether you are fresh out of university or considering a career shif...

Legal Jobs
Connecting Legal Talent with the Best Legal Jobs

​Are you ready to take the next step in your legal career? Whether you're an aspiring solicitor, a seasoned legal professional, or looking to specialise in a particular area of law, finding the r...

Insurance Jobs
Your Gateway to the Best Insurance Jobs

Looking for your next career move in the insurance sector? Gerrard White is a specialist insurance recruitment agency connecting talented professionals like you with leading insurance firms across ...