Special Report - Payroll: How can hiring firms achieve effective off-payroll compliance?

ADVERTISEMENT FEATURE: The Off-Payroll legislation will take effect in April 2021, so robust compliance is crucial for hiring firms in the private sector and their recruitment partners.

Covid-19 contributed towards a 12-month postponement to the legislation’s rollout and, while some firms have used the extra time to establish rigid compliance processes, others are yet to act.

Firms that have been daunted by the task need delay no longer with solutions from service providers that specialise in Off-Payroll compliance. 

Meeting the ‘reasonable care’ requirement

Hiring firms need to satisfy the legislation’s ‘reasonable care’ requirement when considering the IR35 status of contractors and provide a Status Determination Statement (SDS).

The concept of ‘reasonable care’ is understood by most tax experts and HMRC has also published some useful guidance, which includes: 

  • Taking care to seek ‘appropriate advice’ to ensure correct tax treatment
  • Conducting thorough status assessments and preserving detailed records
  • Continuing to monitor the status of contractors throughout each engagement

Hirers are required to make informed decisions and therefore show they understand the legislation. IR35 & Off-Payroll – explained details everything stakeholders need to know, with chapters dedicated to helping hirers and agencies overcome compliance challenges.

Firms will need to demonstrate that they have detailed record keeping and ongoing monitoring in place – and that they have taken appropriate advice.

Is the compliance solution demonstrably accurate?

Even with the best intentions, hiring firms may fall foul if an HMRC enquiry deems their status to be incorrectly assessed. This can be avoided by choosing a compliance service that can demonstrate assessment accuracy, showing detailed test data that concurs with tribunal outcomes.

Does the solution take a compliance-led approach?

Off-Payroll compliance isn’t an issue that can be simply circumvented via an insurance policy slapped on top of a lip-service compliance process. It’s not possible to simply insure against the non-payment of tax, in the same way that you cannot insure against committing a driving offence say, or breaking any other law. Insurance companies will not compensate if compliance obligations have not been met. 

Adopting a robust compliance-led approach offers the best protection in the event of an HMRC enquiry and should avoid a firm’s reputation being publicly dragged through a tax tribunal. As the old saying goes, prevention is better than cure.

Beware of opportunistic service providers that offer status assessments that are really designed to steer customers into buying something else. 

Ensure that you have effective Off-Payroll compliance

Effective Off-Payroll compliance requires consideration of many factors, all of which have been accounted for by IR35 Shield and its suite of compliance products for businesses, tax professionals and contractors.

Built by a team with a two decade obsession with IR35 and over 25 years’ software development experience, IR35 Shield sifts through vast amounts of data to help you reach decisions on a grand scale in real-time whilst bringing speed, scalability, consistency and accuracy into the complex world of employment status case law. It means those in the supply chain using IR35 Shield can run reports, gain insights and identify problems quickly. IR35 Shield continues to innovate and set the standard as the most robust compliance-led solution on the market. 

Dave Chaplin is CEO and founder of contracting authority ContractorCalculator and IR35 compliance solution IR35 Shield. He is also the author of IR35 & Off-Payroll Explained.

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