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March 4

IR35: what you need to know

Flex News

James Moore

James Moore

IR35: what you need to know

8 essential tips for in-house counsel

Sandra Martins, Head of Employment at Radius Law, recommends these 8 practical steps on what in-house counsel can do to prepare and make sure your organisation remain compliant:

  1. Undertake a full audit of the existing contractor workforce and determine how the company wants to engage with these people going forwards: i) who should bear the costs of any potential implications of the changes? ii) would it be useful to offer an employment contract?
  2. Enter into a dialogue with contractors — this is not just an issue for HR, but also one for general counsel and those commissioning the work
  3. If you want to remain out of the IR35 regime you will probably need to give up a lot of control over factors such as how the work is done or who is doing the work — will it be worth it?
  4. Consider whether outsourcing would ease some of the pressure on the company
  5. Carry out a status determination statement (SDS) on relevant contractors and issue this to the worker and the party the client contracts with
  6. Put in place an IR35 policy and processes to identify challenges: i) keep records on relationships with contractors and review them at least once a year. ii) train managers on how to comply with the new rules iii) update relevant privacy notices to provide for information sharing under IR35
  7. Determine who has the upper hand between contractor and employer and draft your contracts accordingly
  8. Review contracts with intermediaries

The Uber decision: what does this mean for legal teams?

A common question is whether the judgment in Uber BV and others v Aslam and others - one of great importance as an explanation by the Supreme Court of how worker status is to be assessed - will change things in this area.

The judgement held that whether a contract is a ‘worker’s contract’ is not to be determined by applying ordinary principles of contract law. Rather it is a matter of statutory interpretation, not contractual interpretation.  As such, it is important to regard the purpose of a particular provision and to interpret its language, so far as possible, in the way which best gives effect to that purpose.

Further, the Supreme Court therefore looked at the relative degree of control exercised by Uber and drivers respectively over the service provided to passengers.

For the full story and practical implications of this judgment to consider, you can read the LexisNexis news analysis on it here.

FAQs

Where can I find more information about the IR35 off-payroll rules?

Practice Note: IR35—off-payroll workers is a comprehensive guide produced in partnership with David Smith of DLA Piper, covering issues such as:

  • precisely which ‘engagements’ are covered
  • the conditions that apply where the intermediary is a company
  • the ‘notional contract’
  • the requirements in relation to the status determination statement (SDS), and
  • the consequences where the off-payroll IR35 regime applies

As an end-client, what practical steps should I be thinking about?

Practice Note:IR35—off-payroll workers—practical considerations for the end client examines:

  • how to identify the end client (and the fee-payer)
  • how to approach the business’s overall stance on compliance obligations
  • ascertaining which engagements are affected
  • assigning responsibility within the business
  • dealing with the SDS obligations
  • contractual arrangements
  • relevant HMRC guidance

Our organisation will be a fee-payer under the IR35 off-payroll rules. What steps should I be taking?

Practice Note: IR35—off-payroll workers—practical considerations for the fee-payer examines:

  • how to identify the fee-payer (and the end client)
  • dealing with the SDS obligations
  • the ‘deemed direct payment’
  • contractual arrangements
  • payment practicalities
  • HMRC guidance

Also see our Checklist: Off-payroll IR35 regime for medium and large private sector entities—checklist.

Does a contractor who falls within IR35 then become entitled to rights under the agency worker regulations?

Rights under the Agency Worker Regulations 2010 depend on whether the worker in question falls within the definition of ‘agency worker’ in those Regulations. For further information on that definition, and the implications of protection under the Regulations, see Practice Note: Rights under the Agency Workers Regulations 2010 and Practice Note: Agency worker status.

Does a contractor who falls within IR35 then become a worker for employment protection purposes?

As with the IR35 regime generally, where the off-payroll IR35 regime applies, it operates for income tax and NICs purposes only. The legislation does not confer wider employment status on the individual and accordingly the individual does not accrue employment rights with the end client or any other third party in the relevant contractual chain.

However, the usual status tests will still apply. For further information, see Practice Notes: Worker status and Employee status.

More information

  • Sign up to the free General Counsel slack channel. This online forum is an extension of Flying Solo - a forum for sole in-house lawyers or those in small teams. It is run by a committee of in-house lawyers and facilitated by LexisNexis, Radius Law and Flex Legal.
  • LexisNexis Practice Note: IR35—off-payroll workers, produced in partnership with David Smith of DLA Piper, for a comprehensive guide to the off-payroll IR35 regime.