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IR35 off-payroll working legislation: how to identify risks in your supply chain?

IR35 • Jan 20, 2023 12:26:00 PM • Written by: Georgia Reynolds

How will the IR35 legislation affect your business?
Currently, contractors engaged via their own personal service company have the responsibility of
determining their own IR35 employment status, and your end clients have no liability. Whereas, from
April 2021, your end clients will be held liable for making the correct employment status decision for their
contractors ensuring all contractors in your supply chain are paying the appropriate taxes.

Many of the contractors may be engaged via an agency like yours or other intermediaries in the supply
chain but if anything were to go wrong i.e. tax deductions have not been made correctly, the risk comes back to your end clients.

"More than 15% of the recruitment agencies in the UK had no knowledge about off-payroll working legislation and its rules"

IR35 legislation how to identify risks

1. Agency/intermediaries not engaging workers appropriately
If your agency or other intermediary does not engage the worker appropriately then the HMRC financial tax risk can ultimately fall back on your end clients.
For example, if your end client decides that an assignment is caught by IR35 and the intermediary pays that workers limited company gross then you can become liable for the tax and national insurance that should have been deducted and paid to HMRC together with interest and penalties. Understanding how every worker is engaged and paid in your supply chain will eliminate risk.

2. Financial standing of intermediaries
If any of the companies in your supply chain do not pay any of the tax due or the correct amount with
accurate deductions where necessary, HMRC will come after them in the first instance. However, as we’ve said the financial and reputational risk ultimately lies with your end clients so they are the ones ultimately at risk. With that in mind, you may want to assess the financial standing of every party in the supply chain so you can mitigate this risk as much as possible.

3. Transparency
In line with the above information, if your end clients have made a status determination for one of their workers and they are being paid via an intermediary, it’s your responsibility if acting as a fee payer as well, to ensure these payments are correct and in line with the off-payroll working rules. Your end clients are accountable for passing the employment status down the supply chain as well as completing regular audits to ensure this compliance continues.

4. Credibility of supply chain
You may also want to check how long the intermediary has been in business, whether they are highly leveraged and whether the directors or owners have any negative history with HMRC. 

According to a report, more than 15% of the recruitment agencies in the UK had no knowledge about off-payroll working legislation and its rules. We understand that recognizing and dealing with all these risks may be daunting. From training, communications, doing IR35 assessments, putting new processes in place, ensuring workers are engaged correctly and with credible intermediaries etc. is all time-consuming when you have a to do recruitment on a consistent basis. This is where giant steps in; with 30 years of independent specialist workforce management experience, we can take care of everything related to off-payroll working for your agency.


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Georgia Reynolds

Marketing Coordinator – Content