In a recent survey by Kingsbridge Contractor Insurance, 48% of businesses who are responsible for the status determination statement (SDS) of any contractors they hire, said they don’t trust HMRC’s CEST tool for giving accurate status determinations.
Many of them (44%) also said that they found the tool unclear and that it didn’t provide a good user experience, showing a general sense of distrust of the CEST tool. Nonetheless, businesses are still putting their trust in the tool which should be, at best, used as a rough guide to determine status. It is not, by any measure, a conclusive answer to whether IR35 applies.
Andy Vessey ATT, Head of Tax at Kingsbridge said, “No one actually knows what HMRC’s risk assessment criteria is for selecting businesses who will receive IR35/off-payroll enquiries, so it could happen to anyone. Despite your best efforts to be totally compliant with the off-payroll legislation, HMRC may still open an investigation to ensure you are meeting your obligations.”
He continued, “The risk of being subject to an investigation is amplified where you are both the end client and the fee-payer. Recent high profile cases such as Gary Lineker, Eamonn Holmes and Stuart Barnes, illustrate the potential financial damage that an IR35 enquiry can have on your business in terms of professional defence costs, tax and NIC should HMRC win the day.”
So what can you do if you don’t have oodles of money to risk being at the losing end of an HMRC investigation? Many companies are turning to Off-Payroll Protect, a specialised IR35 insurance product that saves you time, grief and reputational damage by offering enhanced cover for each contractor you hire. It helps you to mitigate the risks associated with IR35, whether it’s professional fees to defend an IR35 status enquiry, cover for Tax & National Insurance liability, as well as covering interest and penalties in the event a contractor is deemed inside IR35.
The legal defence cover of Off-Payroll Protect actually guards your tax liability across the entire supply chain, irrespective of whether you engage contractors directly (and are therefore both the end client and the fee-payer) or whether the recruiter engages with them.
