Top tips: Preparing your business for IR35

Law firm Aaron & Partners has put together a list of five top tips aimed at business owners managers and HR professionals to help them prepare for the IR35 tax changes coming into effect in April 2020.

Claire Brook, an Employment Law Partner at Aaron & Partners, provides practical advice to a range of UK-based clients on all aspects of employment law, with a specialism in legislative changes and contractual terms and policies.

Claire said:

“There is still a lot of confusion around IR35 and a huge amount of inaccurate information that businesses seem to be picking up.Despite the government recently announcing a number of proposed changes to IR35 reform, there is still nothing to suggest any delay to the implementation.

“The changes will be significant, therefore it is vital that businesses prepare. Medium and large organisations that fail to take the necessary steps to comply in advance of the reform risk potentially large tax liabilities in addition to employment claims in the ET.

“To offer some help and guidance, we’ve produced a list of five top tips to help business owners, HR professionals and managers prepare for IR35.”

1. Conduct a thorough audit

Identify who the organisation engages by carrying out an audit of all your suppliers/consultants and contractors.

2. Assess and determine employment status

From April 2020, the responsibility for assessing an individual’s ‘employment’ status will shift to become the organisation’s burden as an ‘engager’. Check whether each individual meets the tests of genuine self-employment. The government’s free Check Employment Status for Tax (CEST) questionnaire tool has been introduced for employers to use to determine whether IR35 working rules apply, although we would always recommend seeking professional advice if uncertain.

3. Communicate with contractors

It is vital to engage in appropriate communication with the individuals involved, to ensure accurate determination is reached and you should always take advice as appropriate. Once you have determined employment status, it is important to remain transparent with contractors to avoid confusion or disputes. In the event of a dispute on your status determination, you must provide your response within 45 days.

4. Review current contracts, policies and procedures

Engagers, agencies and others in the supply chain should continue to scrutinise and review the policies and procedures they currently have in place to assess and determine employment and tax status.

Keep contracts under review and ensure that you have approprirate contracts for services in place for your contractors. We can review your contracts in light of the changes to check your documents are compliant.

5. Reduce your exposure to risk

Reduce your exposure to risk by monitoring and reviewing the ongoing arrangements with contractors.

Ensure that self-employed contractors are treated as self-employed and do not “manage” them in the same way as your workers or employees – ensure that the reality of the day-to-day relationship is that of self-employment.

Keep records!

Risks can include liability for income tax and National Insurance Contributions that should have been paid on earnings and further scrutiny by HMRC in relation to tax and national minimum wage (including potentially significant fines and penalties depending on the circumstances), separate and in addition to potential claims in the Employment Tribunal.

The IR35 reform will come into effect in April 2020 for medium and large-sized companies within the private sector.

To support businesses in preparing for IR35, Aaron & Partners is hosting a dedicated IR35 Employment Law Master Class to help professionals gain a more thorough understanding of the new legislation.

To find out more about attending a Master Class visit: https://www.aaronandpartners.com/event/employment-law-masterclass-january/