IR35 determination was previously the responsibility of the PSC, however, from April 6th 2021 the responsibility and liability for correctly determining the appropriate employment / tax status of a PSC switched to the end user (Amey). Appropriate status determinations are achieved through the periodic execution of a ‘status determination test’ for each identified PSC. Further information about the ‘off-payroll working rules’ can be found on the gov.uk website.
What this means:
The legislation reforms and updated guidance published by HMRC make it clear that all medium / large sized organisations are responsible for and must determine the IR35 status of all PSCs working for them and those planning to work for them. Failure to comply with the reformed legislation carries material risks for Amey, these can include:
- Recovery of underpaid Income Tax and NI.
- Fines for every identified case of incorrect determination.
- Exclusion from bidding and partnering with public bodies.
- Failure to demonstrate robust controls in this area will lead to an increased likelihood of companywide tax inspections.
We need your active participation to ensure we are always compliant with HMRC legislation.
Responsibility sits with:
- All hiring managers
- BU representatives (listed below)
- BU management
- Amey
How is IR35 status determined?
IR35 status tests take a number of factors into consideration, but three key elements are:
- Supervision, Direction and Control
- Mutuality of Obligation
- The Right of Substitution
In applying IR35, an assessment is made as to whether a person is a contractor providing Business to Business services or is instead the equivalent of an employee for the purposes of paying tax. An off-payroll worker may therefore either be:
- Inside IR35: Treated by HMRC as an employee for tax purposes
- Outside IR35: Classed as a sub-contractor
Statement of Works & IR35
It is important that you are understand and are aware of the relationship between a Statement of Works and IR35 and know where to seek guidance if you are unsure about a specific agreement.
A Statement of Work (SoW):
- Is a document which details the specifics of a piece of outsourced work.
- It forms part of a managed service agreement between two parties (usually the end user and the supplier such as a consultancy business) for a specific project.
- Generally, a SoW will accompany a Master Service Agreement (MSA) in place that governs the overall relationship of the parties (including high-level topics such as confidentiality and indemnification clauses), usually in the form of a schedule or addendum.
- MSAs and the accompanying SoW are generally used to reflect that there is a fully contracted-out service, whereby the supplier is engaged to manage and deliver a project(s) under clear outcomes and deliverables, which is of course different to provision of labour, usually covered by a standard contract for services.
Engaging contractors with a Statement of Work or moving to such an arrangement between an agency supplier and client does not automatically avoid IR35.
Only when a service is fully outsourced does the IR35 status determination obligation sit with the supplier. To qualify, the supplier has to have complete control over:
- The Deliverables
- The Outcome
- The Resourcing
- The provision of the service in its entirety.
At audit, if HMRC determines that an SoW agreement is the supply of labour masquerading as an SoW they will look beyond the contractual set-up and will fine Amey accordingly.
Any SoW agreements that are not fully outsourced will be subject to an IR35 review if the labour / resource supplied includes PSC workers:
- If you are unsure if an existing SoW agreement is fully outsourced, please contact ir35info@amey.co.uk for guidance and clarity
- All new SoW agreements should be discussed with your Procurement representative and / or ir35info@amey.co.uk prior to engagement.
Recruiting an IR35 Compliant Temporary Worker
Any temporary worker wishing to be paid via their own Limited Company as a PSC must complete an IR35 assessment prior to starting work with Amey. Only if an ‘Outside’ determination is confirmed and approved by an Amey MD can a temporary worker start work and be paid via their Limited Company.
Amey has partnered with IR35 industry experts, Qdos Consulting, to determine the IR35 status of all PSCs engaged. Qdos are one of the UK’s leading experts in IR35 and support Amey to conduct rigorous assessments on roles and contractors to determine IR35 outcomes.
Prior to recruiting a temporary worker, and in particular for roles that may typically attract a worker wishing to be paid via their Limited Company, a Role Based Assessment must be completed via our Master Vendor Partner, Hays or via the IR35 project team if via another approved supplier. This assessment must be reviewed alongside the Amey IR35 specialist and will provide hiring managers with a view of whether the role will fall “Inside’ or ‘Outside’ of IR35.
Role-based assessments can only make a determination based on limited factors and therefore any Outside Determination should always be followed by an individual assessment.
Should a worker fall Inside of IR35 once assessed by Qdos, the compliant payment options are:
- Pay-As-You-Earn (PAYE)
- Via an Umbrella Company (FCSA or Professional Passport accredited)
If you need a contractor to complete an individual assessment or wish to carry out either a role based assessment or a sub-contract review, please contact ir35info@amey.co.uk in the first instance.
If you need to share IR35 information with a temporary worker, you can provide them with the Amey Temporary Worker - IR35 Flyer
BU reps:
- Transport Infrastructure: Melissa Langdon / Dave Hutson / Kirstie Jones
- Secure Infrastructure: Jemma Cornah
- Consulting: Corinne Brazier
- Group: Emily Crees / Mark Bailey
- Waste Treatment: Lisa McRae
- Utilities: Elizabeth McDonald
If you have any questions about the engagement of workers, please raise them with your People Partner or with Emily Crees – Resourcing Business Partner: ir35info@amey.co.uk or emily.crees@amey.co.uk.