Contractors, have you seen HMRC’s Help to Comply with IR35 and OPW guidance? It’s well worth a look

As I pointed out in April to readers of ContractorUK, HMRC late last year published guidelines entitled, ‘Help to comply with the reformed off-payroll working rules (IR35) – GfC4,’ writes Rebecca Seeley Harris of ReLegal Consulting.

What Help To Comply on IR35/OPW is, and isn't...

These guidelines are for organisations who engage workers under the off-payroll working rules (OPW). And they are designed to demonstrate what good practice with the off-payroll working rules looks like from HMRC’s point of view.

This guidance from November 2023 is not designed to be used in isolation or create an end-to-end process. It should be used alongside existing guidance from HMRC on off-payroll working.

This is useful for the contractor -- so they can understand what the hirer or recruitment agency is required to do to comply with the OPW rules

14 Parts

The Revenue guidance manual is split into 14 parts; and these include:

  1. Training your staff
  2. Record keeping
  3. Considering the requirements of a new role and the off-payroll working population
  4. Contracted out services
  5. Making Status Determinations
  6. Client-led disagreement process
  7. Outsourcing OPW responsibilities
  8. Internal audit process
  9. Correcting errors, guidance and legislation

Part 2 -- Training your staff

If the organisation is within the scope of the OPW rules, they need to have robust training in place for employees who will need to understand and operate the rules.

Part 2 – Training your staff – shows that all organisations, including clients, deemed employers, and agencies in the labour supply chain, will need to consider the content of the training they will provide.

This training will need to cover:

  • the off-payroll working rules
  • what is required of different parties in a contractual chain
  • how to understand employment status principles, to make an accurate determination

These organisations are advised by HMRC that they can use a “generic, off the shelf” training package. But, if the organisation is significantly impacted by the OPW rules, I believe they are more likely to need a custom-made training package.

According to HMRC, the OPW/IR35 training should include, among other things:

  • pre-engagement considerations, such as the scope of the adverts, engagement terms and conditions and discussions with fee payers.
  • onboarding considerations, such as ensuring all engagements within scope of the OPW rules are considered, and what interaction is needed with any other parties involved in the labour supply chain, such as agencies.
  • understanding whether any managed services are fully contracted out for the purposes of the OPW rules.
  • the use of employment status determination tools, such as the Check Employment Status for Tax (CEST) tool.
  • understanding who in the client organisation is responsible for signing off status determinations.
  • how to avoid blanket determinations (where a client makes the same status determination across a group of workers, without considering the contractual terms and actual working arrangements) . The guidance here adds: “HMRC do not accept blanket determinations.”
  • how to follow the disagreement process if the worker or the deemed employer disagrees with a status determination
  • internal auditing processes

Part 7 -- Contracted-out services

This part of ‘Help To Comply’ (as the guidance is being called) covers both identifying what a fully contracted-out service is and Statement of Works.

HMRC says it is aware of schemes advertised, which claim they can evade or bypass the off-payroll working rules. They claim to do this by presenting a supply of labour as a managed service, or by providing statements of work.

The Revenue advice continues: “The existence of a statement of work does not automatically show that an engagement is a truly contracted out service. This depends on the reality of the engagement, rather than on how a contract is labelled. Service providers vary in size, but would typically have a number of workers to help them fulfil their obligations.”

In addition HMRC warns that “you” i.e. the client “ should be particularly diligent in cases where the service provider is an individual, working through their own intermediary.”

Part 10 -- Client-led disagreement process

It is this section which will be of most interest to the contractor.

The OPW rules make the client responsible for deciding a worker’s status. The rules also require the client to deal with disagreements of these decisions, made by workers or deemed employers. Other parties in the labour supply chain do not have the right to disagree with an employment status decision.

As the HMRC guidelines go on to state, the contractor or the deemed employer can raise a disagreement verbally, or in writing.

So, this means whoever is responsible in the organisation for OPW needs to be able to recognise when a conversation with a contractor constitutes a disagreement with the assessment under the OPW rules.

HMRC continues: “A valid disagreement must include reasons for the dispute.”

My reading between the lines -- plus an omission

Then, reading between the lines of the guidance, the advice is that client representative here (“hiring manager” is specified) might need to have another member of staff who is more senior than themselves – i.e. the person who made the original decision.

The guidance in the next sub-section, ‘Minimum Guidance’ correctly observes that the client-organisation has 45 days to respond.

Perhaps disappointingly for some, Part 10 doesn’t give any guidance on what happens if the contractor is still unhappy if the organisation doesn’t change their assessment.

Glossary of terms

There is a useful glossary at the end of Help To Comply for those who are unfamiliar with the terms under the OPW rules.

There’s also further guidance under Section 14 – ‘Next steps — correcting errors, guidance and legislation.’

So, what should contractors/end-clients make of this IR35 Help To Comply guide by HMRC?

I have been directing my clients to the Help to Comply manual and using it as part of my training packages relating to the OPW rules. 

Furthermore, I would consider the guidelines part of taking “reasonable care” and, helpfully, it is free. 

It must be remembered, however, that this guide is for the hiring organisation under the off-payroll working rules. It would perhaps be helpful then if HMRC did a similar guide for the contractor who is either working under the ‘small company’ exemption or is challenging an end-client’s assessment under the OPW rules. As I stated earlier, there is no guidance for the contractor on how to appeal to HMRC after the  client has declined a challenge for an inside IR35 assessment.

Therefore having knowledge of, and following the Help to Comply guidance will put clients in a better position to understand HMRC compliance, in the complex area that is OPW and IR35.

Friday 24th May 2024
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Written by Rebecca Seeley Harris

Rebecca is a leading expert in employment status, IR35 and the law involving independent contractors and the self-employed for the purposes of tax and employment law. Rebecca has run her own consultancy for the past 20 years covering all employment status issues such as off-payroll in the private and public sector, otherwise known as IR35, s.44 and any issues affecting the self-employed and personal service companies.
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