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Business Legal Services
Employment Status and IR35
Making mistakes relating to the application of IR35 can be costly for your business. Minimise these costs with guidance from our employment law experts.
Information about IR35 – this area of law applies in both the public and the private sector. If you would like help in better understanding this area of law, as well as guidance on how to comply with IR35 related obligations, please get in contact with us and let us know.
Assessing the employment status of those who work for and with you – it is critical for tax purposes to ensure that you have assessed the status of those who work with you correctly and failure to do so could leave your business liable for future payments to HMRC. We have extensive experience in assessing employment status and the process of approaching those who work with you to discuss this.
Drafting templates – we can draft IR35 related documents such as status determination statements, contracts which contain provisions regarding employment status and tax obligations, together with indemnities to protect the company in the event of a dispute.
What are the benefits of seeking professional IR35 advice?
Save time and money
Reduce time spent on trying to research the changes relating to IR35 and how they might apply to your business. One of our employment solicitors would be happy to discuss your specific circumstances and can advise you on any relevant IR35 provisions and how to deal with these, whilst you continue to focus your time and energy on running your business.
Reduced risk of non-compliance
We will provide you with peace of mind in knowing that you are in safe hands with solicitors who will advise you of IR35 requirements and how best to comply with them.
Audit your existing intermediary arrangements
We can carefully review and analyse the risks related to your current intermediary arrangements and, where appropriate, advise you on alternative structures and strategies for resourcing your business.
Clear templates
Once we have discussed your resourcing requirements and the best options for your business, we are able to produce the templates you require in a clear and precise way which are easy for you to follow.
What are employer’s responsibilities relating to IR35?
Since 6 April 2021, the off-payroll working rules were extended to large and medium-sized companies in the private sector. Private sector companies are considered medium or large-sized if they meet two or more of the following conditions:
- have an annual turnover of more than £10.2million
- have a balance sheet total of more than £5.1m
- have more than 50 employees.
Under IR35, end user clients must determine a worker’s employment status and issue a status determination statement (SDS) to the worker and their intermediary. If the end-client fails to provide the SDS or fails to take reasonable care in preparing the SDS, the end client will be the deemed employer and would need to account to HMRC for tax and NICs. A crucial step for end user clients is therefore the assessment of the worker’s deemed employment status and issuing the status determination statement.
A statutory dispute resolution process applies meaning a worker or deemed employer in the supply chain can make representations to the end client that the SDS is incorrect, which the end user client must respond to within 45 days failing which it will become the deemed employer. Consequently, if you are an end client and a contractor or deemed employer in the supply chain disagrees with your SDS and initiates the statutory dispute resolution process, you will need to ensure that you respond within 45 days of receiving such a complaint, otherwise you may become responsible for accounting to HMRC for tax and NICs. You may wish to seek professional advice at an early stage if you are changing the status of a contractor
Responsibility for actually accounting for tax and national insurance contributions to HMRC is the responsibility of the ‘fee-payer’ which is usually the end client, although it could be another entity in more complex supply chains. There is also a legal obligation on the end user client to respond to a request for information about their size from the agency or worker.
What if my business does not comply with IR35?
It is possible for HMRC to go back at least six years and evaluate past contracts to see if the legislation relating to IR35 applies, and where applicable, demand income tax, NICs, penalties and interest and so it is worth ensuring your business complies if you are the end user client or fee-payer in the labour supply chain. Where HMRC disagrees with an end user client or fee-payer’s status determination and considers that IR35 applies to an engagement of a contractor, it will recover arrears of tax and NICs from the end client or fee-payer. However, a new statutory set off mechanism was introduced on 6 April 2024 which allows end user clients and fee-payers to offset arrears of tax and NICs liabilities against taxes already paid by the intermediary, which will be a welcome development for many procurement and finance teams.
Who we help: Employers with growing teams across the UK
At Harper James, we champion ambitious businesses, and we are able to support them at each stage of their development. So, as your team starts to grow and you need to get your HR policies off the ground, we’ll be there to support you, getting to know your requirements and aligning your employment documents with your longer term, commercial goals. By plugging any gaps in your legal knowledge or supporting you where you don’t yet have the resource, we can help you successfully build your team. We’ll help you put the legal fundamentals in place so that you know, right from the off, that you’re compliant with current legislation and not putting your business at risk.
Why you should choose Harper James
We have an experienced employment team who are well versed in dealing with contentious and non-contentious matters before, during, at the end of and after employment. Our team is particularly skilled at understanding and dealing with complex legal situations promptly and providing advice in a friendly and down to earth way.
Employment status advice you can trust
All of our employment lawyers previously worked for a top 100 UK law firm or in-house at large international businesses. Many having achieved partner level or beyond, with at least 10 years post qualified experience. Find out more about the employment law team here:
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