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IR35 Fixed Fee Employment Status Review

Changes to the off-payroll working rules (also knowns as IR35) in the private sector are due to come into effect for medium and large organisations (as defined in the Companies Act 2006) on 6 April 2021.

With effect from 6 April 2021, the responsibility for determining a contractor’s employment status will shift to the end client (i.e. the business who benefits from the contractor’s services).  Where an end client concludes that the IR35 rules apply, the fee payer (i.e. the organisation paying the intermediary for the contractor’s services – this could be the end client or an agency) must account for and pay the related tax and NICs, including Employer’s NICs, to HMRC.

What should businesses be doing now?

Businesses should carry out a detailed assessment to determine the employment status of their contractors for the purpose of IR35, making use of HMRC’s ‘Check Employment Status for Tax’ (CEST) tool where appropriate. Specialist tax advice should also be obtained, to understand the implications of IR35 on each business ahead of the changes coming into effect.  The IR35 area of our iToolkit contains resources to assist HR3 members in dealing with IR35.

Is there anything else to consider?

If a business receives a positive assessment for tax purposes, which confirms that the IR35 rules are likely to apply, this may indicate that there is a wider issue for the business to address.  At present there are separate frameworks determining employment status for the purposes of tax and employment rights (although there is significant overlap between the two).  If the results of the CEST tool or any specialist tax assessment suggest that someone is an employee for tax and social security purposes, the Employment Tribunal may or may not treat that person in the same way for employment rights purposes.

Businesses should therefore also undertake a review of their current worker, employment and self-employed agreements and consider how they engage with these individuals in practice, to determine their likely employment status for employment law purposes.  Incorrectly categorising a worker or employee as self-employed could result in back-pay claims for unpaid holiday pay and other benefits.  Individuals who display the characteristics of employment status may also be able to bring claims for redundancy pay and/or unfair dismissal.

Fixed-Fee Employment Status Review

Our Employment and HR team are offering a fixed-fee employment status review which includes:

  • An assessment of the contract and working arrangements for your self-employed contractors
  • Written advice on the likely status of your contractors, for employment law purposes, with recommended actions to reduce risk

Cost:  £750 + VAT

Our fixed-fee package is available to HR3 members and non-members.

The above fee applies where there is one type of contract or working arrangement to consider.  Where there are multiple contracts or working arrangements, a bespoke quotation will be provided.