IR35 investigations quadrupled
How to be compliant avoid falling foul of the law
“Lies, damned lies, and statistics“. We see them every day, and every day business owners are making critical decisions based on the latest trends and developments which are typically manifested in the form of – you guessed it – statistics. In recent weeks, a striking set of statistics were released which show that the number of IR35 investigations have increased four-fold year on year.
Many observers liken IR35 to speed cameras – more a revenue maker for HMRC than an effective deterrent.
But having notched up little over £10 million in extra revenues (way lower than expectations) it seems that HMRC have taken a more proactive approach at clamping down on poor contractor practice.
Indeed, between 2010-11, as few as 23 enquiries were instigated by HMRC, followed by a slight increase to 59 the following year. Move forward just 12 months, and this figure leapt to a staggering 256 – a four-fold increase. So why the sudden rise and more importantly, what should recruitment businesses do to avoid falling foul of the law?
The reason why there was a rise is a simple one – pressure. HMRC was heavily criticised for the low number of investigations it had launched. Following public and political outcry over revelations that over 2,000 senior public sector executives were receiving payment ‘off-payroll’, combined with news that more than 1 in 3 BBC presenters were paid under the same terms, HMRC was prompted into action.
What recruitment businesses need to do to ensure they adhere to the law is a little more complex. In short, recruiters need to see their Umbrella Company’s over-arching contract of employment and be sure that it contains the following:
- Guaranteed number of contractually agreed paid hours work – anything above 336 hours over a 12 month period is sufficient to give rise to an obligation on behalf of the Umbrella Company.
- Provision of pay between-assignments, even if that retainer pay is only paid at minimum wage and must not be fulfilled by the payment of holiday pay.
- Evidence that the Umbrella Company’s expenses policy is in line with HMRC rules – HMRC, not the Umbrella Company, will decide what tax relief on travel and subsistence expenses may be due
- References to paid holiday entitlement, sick pay, maternity and paternity pay – Umbrella Companies have the same statutory obligations as any other employer
If you are unsure whether your Umbrella Company is compliant with IR35 or if you would like to find out more information about how it affects you, we will gladly answer any questions you may have.