The new Chancellor, Jeremy Hunt, announced that the off payroll working (IR35) rules presented from April 2021 (6 April 2017 for the public sector) are to continue unchanged in a turnaround of the proposed repeal revealed by the previous Chancellor, Kwasi Kwarteng. On the basis that the guidelines won't change, now is a great time to check the level of your compliance with IR35 responsibilities. Particularly as the HMRC 'light touch' technique to charges for inaccuracies that were not deliberate 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 private and 3rd sectors (excluding those that are "entirely abroad") have the responsibility for deciding whether arrangements with third celebration intermediaries such as Personal Service Companies (PSC) carry out in reality represent a disguised work. Where an arrangement is deemed to be 'inside IR35' on the basis that it is a disguised work, then the fee payer is accountable for running PAYE/NIC on payments, consisting of employer NIC, and where appropriate the apprenticeship levy. The client using the services of the employee operating via an intermediary such as a PSC is also required to fulfill other commitments. For instance, once the client has applied sensible care and has identified whether the off payroll working rules use to an engagement, it is required to communicate that choice in the type of a Status Determination Statement (SDS). It is likewise required for the client utilizing the services to offer a status difference process to handle any disagreements concerning the SDS and respond within 45 days. Where the client is specified as a small company by the Companies Act 2006, obligation for assessing the arrangements, and applying IR35 where needed, will remain with the workers intermediary such as the PSC. Common problems and misunderstandings on off payroll working within the social housing sector Now that the IR35 intermediaries guidelines have actually remained in location for over 18 months, our tax advisors, RSM, are seeing some recurring issues and misconceptions within the sector around the guidelines, including: Obligations with regard to PSC versus obligations with regard to self-employed people Whilst employment status tests for workers offering services to a customer through their own intermediary such as a PSC are the same as status tests for self-employed employees who are not operating through a PSC, the obligations that you have in relation to each differ and we typically see confusion around this. As above, commitments, and threat, in to making use of PSCs by a medium or large client apply from 6 April 2021 just, whereas your obligation to identify whether a self-employed employee is truly self-employed for tax functions have remained in location for lots of years under separate guidelines. Where you are utilizing the services of a PSC, then you are needed to validate your status evaluation in an official SDS and offer a status argument process. A formal SDS does not need to be issued when a self-employed individual is working for you, although ou needs to still evaluate whether they are genuinely 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 functions of work, then they must be treated as an actual worker for both PAYE/NIC and employment rights functions. Where a PSC worker is identified as 'inside IR35' then they are treated as a 'deemed staff member' 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 through the CIS. It is essential to emphasise that responsibilities in relation to assessing employment status and IR35 should be carried out for sub-contractors as they are for any off-payroll worker. It is only as soon as you have figured out that the off-payroll worker is outdoors IR35/genuinely self employed that you can make payments to them under the CIS. In this respect it is often overlooked that each month-to-month CIS professional return requires a declaration to be completed validating that the work status of each specific consisted of on the CIS return has been thought about and it has actually been validated that they are not in fact an employee or deemed employee. Obligations where employees are sourced through a recruitment firm Just like many other organisations, housing associations typically source momentary workers by means of 3rd parties such as recruitment firms. In this scenario payments are made to the recruitment agency, but it is essential to obtain verification from the firm on a worker-by-worker basis regarding whether the worker is subject to PAYE/NIC by the company. If the recruitment company is contracting with an employee operating via an intermediary such as a PSC and onwardly providing them, then the housing association as the client (i.e completion user of the worker's services) has IR35 responsibilities, unless it is a small company as specified by the Companies Act 2006. Importantly, the housing association should think about the status of the employee and release a SDS to both the agency that it contracted with and the employee. Failure to satisfy this responsibility can lead to the housing association ending up being responsible for any PAYE/NIC due. Due diligence on the labour supply chain is likewise important because, beyond IR35, there can be other tax and/or reputational dangers if the employee is engaged by a celebration in the labour supply chain who is not correctly operating PAYE. For example, where the employee is working for a customer in the UK, however is engaged by a party in the labour supply chain based outside of the UK who is not running In summary, for now at least, the off payroll working rules are here to stay and HMRC are stepping up their compliance activity following the end of the 'light touch' year for charges. All housing associations ought to regularly review their compliance in the prominent location of employment status. Our tax consultants RSM deal with many housing associations and other organisations with regard to their responsibilities under the off payroll working guidelines and would be pleased to aid 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 an excellent time to check the level of your compliance with IR35 obligations.