Changes to off-payroll working scheduled for April 2020 are causing businesses to overlook their normal obligations to check employment status.
Before IR35 existed HMRC frequently challenged the employment status of individuals who provided their services on a self-employed basis to businesses.
Eventually, HMRC asked the government for a solution. IR35 gave it the power to extend its employment-status enquiries to individuals who worked for
their customers indirectly, i.e. through an intermediary. The ongoing concerns regarding IR35, especially the April 2020 changes, is confusing businesses
about their other employment status obligations.
New rules aren’t relevant
From 6 April 2020 businesses that aren’t small are responsible for checking the employment status of individuals who work for them through an intermediary.
Until then it’s up to the worker to do it. All businesses, including those categorised as small, remain responsible for checking the employment status
of individuals who work directly for them and are liable for any PAYE tax and NI lost if they get it wrong.
Which workers do you need to check?
You need to look at the overall picture of your firm’s relationship with the individual doing the work.
HMRC inspectors primarily look for whether you, the customer, control when and how the work is done and by whom.
It might be clear to you that a worker is freelance, but look at the position as an outsider might - is there the appearance of control over the work and
the worker? If so, prove the self-employed status by entering all the facts into HMRC’s check employment status for tax (CEST)tool and keep a record
of the result so you can deflect any HMRC enquiry before a tax inspector becomes entrenched in their view.
If you use the services of an individual working freelance, say a bookkeeper, you’re responsible for checking their employment status even if yours is
a small business. Consider if someone outside your business could at first sight view the working arrangement as an employment. If so, use HMRC’s online