In April 2020, off-payroll reforms in the private sector will mean that responsibility for IR35 contractor determination will pass to the end client. This shifting administrative burden will see organisations held liable if they fail to make the correct decisions on whether a contractor falls inside or outside IR35 – in other words, whether they should be rightly classed as an employee or not. This can feel overwhelming for the businesses affected, many of whom lack the time, resources, and expertise to review all of their contractor relationships. Blanket determinations are a solution that we have seen utilised in the public sector and, for many, they can seem like the quickest way to protect their business from HMRC challenges. However, this is one workaround that can quickly backfire. We look more closely at the risks associated with blanket determinations, below.
What is a blanket determination?
A blanket determination is when a client chooses to place all of their contractors inside or outside IR35 without considering individual relationships.
What does HMRC mean by ‘reasonable care’?
This is where an element of interpretation comes into play. IR35 legislation states that end clients must take ‘reasonable care’ in making determinations. But clarification on what constitutes reasonable care is woolly. Legal experts have suggested that taking ‘reasonable care’ constitutes:
Acquiring independent legal advice
Making a full assessment on an individual basis.
This means that individual assessment of contractor agreements is key to taking ‘reasonable care’ and all blanket assessments would fail to meet this requirement. Organisations who are found by HMRC to have failed to undertake ‘reasonable care’ could be subject to an investigation window of 6 years. While those who have been found to make a deliberate error could see this extended to 20 years. It’s also important to note that some insurers will not provide indemnity coverage against an HMRC challenge where blanket determinations have been implemented.
Are role-based assessments allowed?
Role-based assessments are something of a grey area. In theory, if contractors in the same role are working under the same contract and identical working arrangements, the group can be assessed as one. However, some contractor groups have pushed back – arguing that even if contracts are identical, each individual has a slightly different working relationship with a client and that assessments should always be made individually.
How can Cititec help?
Cititec have partnered with IR35 experts, Brookson Legal, to create a complete IR35 solution. Providing individual determinations, expert advice, and indemnity against IR35 tax challenges from HMRC. Don’t choose blanket determinations and put your business at risk, get in touch to discover how we can take the pain out of IR35.