The new Chancellor, Jeremy Hunt, announced that the off working (IR35) rules presented from April 2021 (6 April 2017 for the public sector) are to continue the same in a reversal of the proposed repeal revealed by the previous Chancellor, Kwasi Kwarteng. On the basis that the rules won't change, now is a great time to check the level of your compliance with IR35 responsibilities. Particularly as the HMRC 'light touch' method to penalties for inaccuracies that were not intentional ended on 5 April 2022, and HMRC is stepping up its compliance activity. Recap on IR35 responsibilities Under the rules introduced from 6 April 2021, medium or large-sized organisations in the private and third sectors (leaving out those that are "entirely abroad") have the responsibility for choosing whether arrangements with 3rd party intermediaries such as Personal Service Companies (PSC) perform in truth represent a disguised employment. Where a plan is deemed to be 'inside IR35' on the basis that it is a disguised work, then the fee payer is accountable for operating PAYE/NIC on payments, including employer NIC, and where appropriate the apprenticeship levy. The customer utilizing the services of the employee operating via an intermediary such as a PSC is also needed to fulfill other obligations. For example, when the client has applied reasonable care and has actually figured out whether the off payroll working rules apply to an engagement, it is needed to communicate that choice in the form of a Status Determination Statement (SDS). It is likewise necessary for the customer utilizing the services to provide a status argument procedure to deal with any disputes relating to the SDS and react within 45 days. Where the client is specified as a small company by the Companies Act 2006, duty for evaluating the arrangements, and using IR35 where essential, will stay with the workers intermediary such as the PSC. Common issues and misconceptions on off payroll working within the social housing sector Now that the IR35 intermediaries rules have been in location for over 18 months, our tax advisers, RSM, are seeing some repeating concerns and misunderstandings within the sector around the guidelines, including: Obligations with regard to PSC versus obligations with regard to self-employed people Whilst work status tests for employees offering services to a client via their own intermediary such as a PSC are the very same as status tests for self-employed employees who are not operating through a PSC, the commitments that you have in relation to each differ and we often see confusion around this. As above, responsibilities, and danger, in relation to making use of PSCs by a medium or big client use from 6 April 2021 only, whereas your obligation to identify whether a self-employed worker is genuinely self-employed for tax purposes have been in location for several years under separate rules. Where you are using the services of a PSC, then you are needed to validate your status assessment in a formal SDS and use a status difference process. An official SDS does not need to be released when a self-employed individual is working for you, although ou must still evaluate whether they are really self-employed, and you ought to keep a record of this. If the status of a self-employed employee who is not running through a PSC is evaluated and it is determined that they have the features of employment, then they need to be treated as a real employee for both PAYE/NIC and employment rights functions. Where a PSC employee is identified as 'within IR35' then they are dealt with as a 'deemed staff member' for PAYE/NIC functions just 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 commitments in relation to assessing work status and IR35 need to be carried out for sub-contractors as they are for any off-payroll employee. It is just once you have actually figured out that the off-payroll worker is outdoors IR35/genuinely self used that you can pay to them under the CIS. In this regard it is often neglected that each month-to-month CIS professional return needs a statement to be completed confirming that the employment status of each individual included on the CIS return has actually been considered and it has been validated that they are not in fact a worker or deemed staff member. Obligations where employees are sourced by means of a recruitment firm Just like many other organisations, housing associations often source short-term workers by means of 3rd parties such as recruitment firms. In this scenario payments are made to the recruitment agency, however it is very important to obtain verification from the agency on a worker-by-worker basis as to whether or not the employee undergoes PAYE/NIC by the firm. If the recruitment firm is contracting with an employee operating through an intermediary such as a PSC and onwardly offering them, then the housing association as the client (i.e the end user of the employee's services) has IR35 commitments, unless it is a small company as defined by the Companies Act 2006. Importantly, the housing association need to consider the status of the worker and release a SDS to both the firm that it contracted with and the employee. Failure to satisfy this responsibility can lead to the housing association becoming liable for any PAYE/NIC due. Due diligence on the labour supply chain is likewise important since, beyond IR35, there can be other tax and/or reputational risks if the worker is engaged by a celebration in the labour supply chain who is not correctly operating PAYE. For instance, where the worker is working for a client in the UK, however is engaged by a celebration in the labour supply chain based outside of the UK who is not operating In summary, in the meantime at least, the off payroll working guidelines are here to remain and HMRC are stepping up their compliance activity following the end of the 'light touch' year for charges. All housing associations should regularly examine their compliance in the prominent location of work status. Our tax advisors RSM deal with numerous housing associations and other organisations with regard to their obligations under the off payroll working guidelines and would be pleased to aid with any inquiries. For an initial discussion please contact David Williams-Richardson. The Chancellor announced that the off payroll working rules presented from April 2021 are to continue. Now is an excellent time to examine the level of your compliance with IR35 obligations.