fact sheet
How Beeline Enterprise can help you comply with the UK’s IR35 requirements
The latest version of the UK’s IR35 off-payroll working reforms, effective April 2024, affects both individuals who provide their services and private and public sector companies who use those services.
Under this law, the recipient of the individual’s services must make a status determination statement, explaining whether the individual is employed or self-employed for tax purposes.
When an individual is deemed an employee for IR35 purposes, they are taxed as such, with the “deemed employer” required to pay income tax and NICs via PAYE on any payments for the work.
If the deemed employer incorrectly concludes that the individual was outside of IR35 rules, HM Revenue & Customs (HMRC) may determine that the individual was a “disguised employee.” The financial impact of IR35 can be significant. HMRC can “claw back” money that employers should have deducted at source and there may be interest for late payment. Penalties will be levied where the contractor or employer is regarded as “careless” in underdeclaring tax liability and steeper penalties can be imposed if it can be proved that the IR35 rules were deliberately ignored or flouted.
Ensuring IR35 compliance
The first step all employers should take to ensure compliance with IR35 (and other regulatory requirements) is to gain detailed visibility of their entire contingent workforce, including all contractors. You need to know—and be able to document—who they are, where they are, what work they are doing, and their employment status.
Then, employers should take additional steps that are particularly appropriate to their business, which may include:
- Identify contractors they currently engage and review their tax status using the HMRC CEST or similar assessment criteria
- Review contracts with agencies and other intermediaries to identify those affected by the new legislation
- Decide how to determine employment status of contractors going forward
- Review policies and processes for engagement and documentation of contractors
How Beeline can help
While Beeline cannot establish the employment status of contractors for tax purposes, Beeline Enterprise can provide substantial support for organisations wishing to create and maintain consistent, fully documented, and audit-ready processes to verify IR35 compliance.
Beeline’s support capabilities can be grouped in three categories, as: Assist, Record, and Report.
Record
You may want to ensure that your requisitions clearly state IR35 status, that candidates and suppliers clarify their engagement models, and that all applicable taxes are correctly applied. With Beeline Enterprise, you capture and record all the necessary details.
As your system of record, Beeline Enterprise becomes a continuously updated and incontrovertible source of truth for all data associated with your contractor engagements.
Report
IR35 status determinations may be subject to review, either on a regular schedule or in response to ad hoc enquiries.
Using your Beeline Enterprise’s reporting capabilities, you will be able to report on worker status whenever the need arises.
You can also create reports to remind your managers to re-validate worker status on a regular cadence or when contracts are renewed, extended, or amended.
Assist
Beeline Enterprise can assist in creating a consistent process for determining whether to engage a contractor and assessing the contractor’s tax status. We will work with you to tailor the Beeline Enterprise’s “Guide Me” decision tree capabilities to support your programme office and hiring managers. In addition, we can develop custom-tailored “Did You Know?” contextual guidance pop-ups to provide information and easy-to-follow instructions to prevent confusion or misclassification.
Your Beeline Enterprise workflow can be structured to make key stakeholders (e.g., HR, Procurement, Legal, etc.) part of the contingent labour request approval process when PSC contractors are involved.
We can help you create customer-defined fields (CDF) to trigger and record IR35 assessments with timestamps, ensuring both consistency and auditability. We will work with you to update your onboarding checklist to enforce additional layers of compliance through your MSPs and suppliers.
Mitigate IR35 compliance risk
Some see IR35 and similar legislation elsewhere as catalysts accelerating a fundamental change from buying workers’ “time” to buying workers’ “skills.” In any event, the immediate result is a new level of risk for contingent workforce programmes. To mitigate that risk whilst continuing to attract and get the most from the best talent, we recommend that you follow a checklist similar to the one below:
- Ensure visibility of all contingent workers in your VMS
- Categorise your current contingent workers. Who is likely to pass the IR35 employment status (CEST) test? Who will fail?
- Engage early with your C-Suite to determine the budget impact of IR35 compliance
- Establish a steering group to manage your organisation’s response to IR35
- Partner with your MSPs/suppliers early and agree on a future IR35 testing regime
- Ensure that programme officers and hiring managers are familiar with the three main principles used to determine employment status on any given contract: Control, Substitution, and Mutuality of Obligation
- Create clear guidance around how to engage with contingent workers and the expectations of managers with regards to office protocols and behaviours
- Meet with C-Suite and Executive team regularly, supported by reports generated through your VMS
- Conduct workshops and clinics for programme stakeholders. Do not underestimate the volume of questions or the potential for misunderstanding