IR35 for hirers and UK businesses

What steps can a business take to reduce the risk of IR35 non-compliance?

To minimise the risk of IR35 non-compliance, businesses should conduct regular assessments, seek expert IR35 advice, document the relationships with contractors, manage contracts and agreements, communicate with contractors, stay informed of changes to the rules, and have systems in place to manage compliance.

More detail

Implementing a compliance process can seem challenging for businesses. But your risk can be reduced by following these steps:

Conduct assessments: Assessments of the IR35 status of contractors and the nature of the relationships between the contractors and the business should be conducted to ensure that the assessments are accurate and the correct tax is being paid.

Take professional advice: Businesses can engage the services of professional advisers to help them understand the IR35 rules and guide them on the most appropriate way to comply with the rules.

Document the relationships: Detailed documentation should be created and stored for each contractor, including a written contract and any additional agreements, such as letters of engagement or statements of work, to demonstrate the relationship between the contractor and the business.

Manage contracts and agreements: Contracts and arrangements should be carefully drafted to ensure that they accurately reflect the nature of the relationship between the contractor and the business and to minimise the risk of protracted disputes with HMRC.

Communicate with contractors: Businesses should work closely with contractors to treat them fairly and ensure they understand their status and the implications of the rules.

Stay informed: Businesses should keep up-to-date with changes to the IR35 rules evolving common law and take appropriate action to ensure compliance.

Implement processes and systems: Businesses should implement processes and systems to manage compliance with the IR35 rules, including procedures for conducting assessments, documenting the relationships, and making the appropriate deductions from contractors' payments.

By following these steps, businesses can reduce the risk of IR35 non-compliance and ensure they comply with the rules set out by HM Revenue and Customs (HMRC).

It's important to note that the IR35 rules are complex, and businesses should seek professional advice where necessary to ensure they are fully compliant. IR35 status is a legal matter, not an accounting matter, and experts from the appropriate field should be engaged.

Further resources:

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