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Markel Tax

19 Nov 2019

IR35 in the Private Sector: Protecting 'fee payers'

Whilst we wait for the election to unfold and then hopefully a government to be formed and then early in the new year a budget, forward thinking agencies who will be fee payers in this new regime and some end clients who engage directly, are worried about the implications of getting the decision wrong.

It has become evident that end clients will have to address their responsibilities for making IR35 status decisions, but are unlikely to want to be involved with admin intensive systems nor will they want to face any liability issues because they have failed to take reasonable care.  
 
Agencies are already concerned about the possible ramifications of being saddled with the tax liability if the decision taken to pay ‘gross’ (‘not caught by IR35’) is found to be incorrect.  
 
While the End-client cannot dispose of its obligations under the legislation to make a decision and produce (and pass down) the Status Determination Statement (SDS) this process can be helped along significantly via an agency.
 
Agencies are best-placed to provide a service to end clients of collating and reviewing contracts and working practices for IR35 purposes which could remove the end client’s concerns, or at least some of the administrative burdens.  This service will be further improved by the support of status experts and an insurance-backed protection.
 
End clients benefit from a speedy due diligence service, which effectively creates their Status Determination Statement (SDS) for them, and they know that the agency has financial and practical protection from an HMRC challenge.  The agency has a USP for the end client and all the benefits of that protection.
 
So how are Markel Tax looking to protect fee-payers from the new regime?
 
Due Diligence
  1. Both upper and lower agency contracts reviewed including contractual amendments where appropriate; and
  2. Working practices reviewed:
  • Either via a questionnaire completed by the PSC and signed off by the client; or
  • The client completes job spec signed off by the contractor
Both processes lead to completion and issue of SDS removing a burden from the end client.
Insurance
Tax investigations cover to defend challenges to the status of engagements which have been through the due diligence process
 
Tax Losses Insurance for tax, interest and penalties due following a successful HMRC challenge to the above.  
 
To find out more about how you can protect your position as a fee payer – whether you are an agency or end client engager – contact Markel tax’s IR35 team on 03450 660 035 or email us at IR35@markel.com.
 
Tagged IR35
Next article in series

19 Nov 2019

Six reasons for PSC's to be proactive to respond to the IR35 private sector changes - and not wait until April 2020 to do so!

HMRC has identified a compliance problem – they believe that only 10% of all contractors who should be treating their engagements as ‘caught by IR35’ are actually doing so. HMRC believes that number should be closer to a third of all engagements and that the planned changes to IR35 in the private sector could bring in an extra £3billion for the Exchequer.