As use of temporary labour and contractors has increased, we have seen increasing interest in Grant Thornton’s ESIP technology, which provides confirmation of employment status in all cases, along with a risk rating.
HMRC’s enforcement of compliance continues and we are seeing it gather information through detailed questionnaire requests regarding contractor use. The IR35 rules are far reaching and HMRC has invested in expanding its number of compliance officers, some of whom will be focusing on non-compliant umbrella company arrangements and other forms of tax avoidance.
For businesses that find themselves under scrutiny, it will be paramount to be able to demonstrate that what HMRC refer to as “reasonable care” in relation to consideration of the status of contractors has been undertaken.
Organisations need to ensure that they have a process in place that identifies whether individuals providing their services “off-payroll” need to be considered for IR35 purposes or other legislation, and includes an assessment of their employment status and a clear methodology to dealing with contractor communication.
The training and education of those with these responsibilities within the business will be key. The extent required will differ depending upon the number and variation of contractors.
IR35 is just one element of the broader risk around employment status, with businesses sometimes wrongly assuming they do not have any responsibility to consider other types of engagements in relation to the wider labour supply chain, such as outsourced services, freelancers or entertainers.
The complexity of the IR35 rules and the inconsistency of outcomes within case law looks like it will continue to present a challenge for all parties involved.
Businesses using contractors should therefore ensure that they are appropriately advised and supported to avoid any unforeseen liabilities.
Jonathan Berger is employment tax lead at Grant Thornton UK LLP
