Contractors’ Questions: What is HMRC’s example of a client not taking reasonable care with IR35?

Contractor’s Question: What was stated in HMRC’s example of a client not taking 'reasonable care,' leaked yesterday by the Revenue from its own status manual and guidance on private sector IR35 reform, affecting off-payroll workers?

Expert’s Answer: A medium, non-public sector, company engages an agency to supply workers. The workers supplied by the agency operate through their own PSCs. The client decided not to take any steps to prepare for the introduction of the off-payroll working rules.

They elect to simply determine that all workers who provide their services through a PSC will be caught by the new rules, because they undertake similar roles and are engaged under similar terms and conditions.

They do this, believing that this will protect them from any liability to pay tax and NICs on payments to those workers. The client passes the same SDS to every worker and the agency.

Even though the client has determined that the off-payroll working rules apply to the engagement, and passed on the SDS to the worker and agency, as the company has not taken prudent and reasonable steps when making their determinations, liability rests with it.

The client has not considered the status of the workers contracting under different terms and conditions so they have not satisfied the condition to take reasonable care. The responsibility for the deduction of tax, NICs and apprenticeship levy, and paying these to HMRC, rests with the client.

The Expert’s Answer is a reproduction from Example of a Client Not Taking Reasonable Care, contained in Employment Status Manual 10014, published briefly by HMRC yesterday.

Tuesday 4th Feb 2020
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