The Status Determination Statement
When a business has carried out a detailed review of a worker’s status, regardless of whether the business concludes that a deemed employment exists, it must give both the party they are engaging with and the worker a Status Determination Statement (SDS) confirming its conclusion and the reasons behind that conclusion.
If there is a labour supply chain involved, the determination must also be passed down each stage of the chain by each party until it reaches the fee-payer.
It is wise to document this clearly as, if a party receives the SDS but does not communicate it down the labour supply chain, that party becomes the fee-payer.
As the fee-payer, they will then be responsible for deducting tax and NIC until the determination is passed on to the ultimate fee-payer.
There are rules setting out the procedure and time frame for workers contesting an SDS and the client will be required to introduce a process to consider any disputes.
The process will be client-led; HMRC will not get involved.
HMRC enquiries
IR35 remains controversial since its introduction nearly 20 years ago.
HMRC has raised enquiries throughout the years, many of which have needed the tax tribunal to issue judgement.
The problem with any set of case-by-case rules is decisions go both in the favour of the taxpayer and in the favour of HMRC, with a lack of certainty for those trying to be tax-compliant.
The most recent HMRC activity is the highly publicised campaign against ‘front of camera’ TV presenters and includes tax tribunal cases involving Lorraine Kelly, Christa Ackroyd and Joanna Gosling, amongst others.
The latest policy statement from HMRC released on 22 October 2019 says that HMRC will not use the information collected from the April 2020 changes to open a new enquiry, unless there is “reason to suspect fraud or criminal behaviour”.
This appears to be something of an amnesty based on the fact that other IR35 enquiries generally do not establish fraud or criminal behaviour.
It also seems out of sync with the standard HMRC enquiry processes into business and personal tax returns. How this will work in practice remains a significant risk for both individuals and business.
Business impact
With the cancellation of the November UK budget, there are now serious calls for the April 2020 private sector changes to be delayed.
The taxation Institute has called for a 12 month delay.
This is mainly because the Budget delay results in a knock-on delay to the publication of final legislation.
This is now unlikely to be published until early 2020, leaving businesses with a short and probably unrealistic timeframe to adapt to the changes and embed in business procurement procedures.
