The first anniversary has now passed since the Off-Payroll Working Rules (also known as the intermediaries legislation, or IR35) were rolled out into the private sector. Since 6 April 2021 all medium and large organisations in the private sector have been responsible for assessing the employment status of individuals who provide services to them through an intermediary, typically, a Personal Service Company.

A lot of preparation was done by many businesses with best practices and fair and transparent processes adopted, whilst exercising reasonable care. This includes having robust contractual documentation to support their “outside IR35” status. Complete reliance on HMRC’s Check Employment Status Tool (CEST) is risky as it is too simple to be sure of complete protection.

However, a number of businesses were not prepared or ready to take on the new responsibilities once the reforms took effect. It is evident that some contracts for services were not given due consideration and those used for many decades that supplied people and not services were (and still are) in use. When determining status, consideration is given to whether it is a “contract of service” (deemed employment) or a “contract for services” (not deemed employment). To be compliant the previously drafted boilerplate contracts should be updated with terms that accurately reflect the engagements.

The current case law on employment status, upon which IR35 is based, is changing, with many appeals going through the tax tribunals. HMRC has begun investigating firms, conducting risk reviews with some of the UK’s largest businesses, checking the ‘prevention procedures’ they have in place to police supply chains. They appear at present to be taking a softly softly approach to encourage firms to get things right rather than going for litigation.

If you would like to discuss any aspect of the Off Payroll Working Rules/IR35 and how this may affect your business Sarah would be delighted to talk to you and let you know in more detail how she can assist.

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