Managing IR35 post April 2021

Everyone has been focussing on getting ready for the off-payroll working legislation, but who has been concentrating on the ongoing management of the legislative requirements after April 2021?

In the run up to April 2021 it became clear that many clients were unaware of whether their contractors were working through PSCs, umbrellas or agency PAYE. So, the first task for those clients was to sort the contractors into categories. It was only then that they were able to focus on those likely to be affected by the off-payroll rules, namely those working through PSCs.

This first step was a major undertaking for some clients particularly where they used multiple agencies and the hiring decisions were not centrally controlled since it made the information gathering more difficult. But once the clients understood which of the contractors worked through PSCs they were able to begin the process of assessing the IR35 status of those workers.

Project teams were set up to carry out the assessments either using CEST or eliciting the help of a third party IR35 expert like PayStream. This was a steep learning curve for clients who had never had to consider IR35 before and many leaned heavily on the recruitment businesses for help and guidance. But by April we expect that on the whole, the existing population of contractors will have been categorised and status determination statements (SDSs) prepared and passed to the recruitment businesses and contractors. However any potential appeals off the back of these SDSs will of course need to be dealt with.

But when the dust settles – what does “business as usual” look like and how are clients and recruitment businesses going to cope? Bearing in mind that project teams will probably be disbanded so who is going to be responsible for ensuring that compliance processes are in place and followed.

What are the client’s responsibilities?

• Assessing new roles – Will this fall within a hiring manager’s remit? If so how will the client ensure consistency between hiring managers? This is where an external IR35 expert can help as they will see all the reviews and build a knowledge bank of what should be consistent answers. Clients will need a quick turnaround but will also need to create an audit trail of how a decision was reached.
• Giving recruiters an SDS – For outside roles this will be a prerequisite with the role spec and clients may build this into their task management/CRM systems.
• Re-reviewing the existing population – over a period of time status can change as contractors become part and parcel of an organisation. A new SDS will be required on a regular (perhaps annual) basis – this could take the form of a review of the original SDS by the client or the client might require the contractor to go through a new specialist review at the contractor’s cost.
• Dealing with appeals - Clients don’t have to change their mind but do have to consider appeals. Clients should set expectations as to the level of detail expected from a contractor who appeals an SDS.

What are the Recruiter’s responsibilities?

• Obtaining an SDS from the client - If the recruiter interfaces to the client IT system or vice versa they need to consider how the SDS will be posted. The answer may require some IT development work which can take time.
• Advertising roles as inside/outside IR35 – Before a role is even advertised recruiters need to be aware of the SDS so they can advertise the role accordingly.
• Ensuring compliance in the supply chain – There are likely to be more inside IR35 roles in the future and clients will be keen to ensure that tax is correctly deducted in the supply chain. A compliant umbrella PSL will be essential. Clients will also want reports confirming who is working inside and outside IR35.
• Check the AWR status of PAYE/umbrella workers - This probably won’t have been considered for PSC workers.

It’s to be expected that everyone is focussing on ensuring all of their workers are compliantly set up by April but recruiters shouldn’t be ignoring what their ongoing responsibilities will look like. Making the necessary changes now will be key to avoiding compliance slowing down the hiring process in the future.