IR35 Compliance Checklist

Oct 26, 2022 | Uncategorized

In an exciting “will it, won’t it go” series of events, IR35 is back in the business world’s view.

The off-payroll working legislation reforms, which came into effect for the public sector in 2017 and private sector in April 2021, will remain in place, making end clients responsible for determining workers’ employment status for tax.

So let’s make sure you stay compliant – we’ve put together some key stages for you to navigate through the world of IR35.


Check responsibility

Step one – check if you fall within scope of the IR35 reforms.

Only medium and large organisations are subject to the law change in 2021.

If two or more of the following situations exist, you are in charge of assessing a contractor’s employment status for tax reasons:

  • you have an annual turnover of more than £10.2 million
  • you have a balance sheet total of more than £5.1 million
  • you have more than 50 employees.

Alternately, you can employ a simplified test that states you must comply with the regulations if your annual revenue exceeds £10.2 million and you are not:

  • a company
  • a limited liability partnership
  • an unregistered company
  • an overseas company.

If your contractor asks, you’ll need to be able to provide an accurate response since you’ll need to be able to authenticate the size of your organisation.

Determine your employment status

If your business is a medium-sized or large one, you must apply the IR35 regulations to determine the status of each employee who uses their own intermediary. Even if they are given through an organisation, this is still the situation.

You must next inform the worker and the person or organisation you contracted with of your decision using a status determination statement (SDS).

You must include your conclusion and the factors that led you to it in your SDS.

Make sure to exercise reasonable caution when making your decision; it is against the law to make “blanket determinations” of several contracts at once.


Keep detailed records 

You must also keep track of all decisions you make regarding your job status.

These must contain the fees paid as well as the justifications for your decisions in each instance.


Establish a process for disagreements

You must have a method in place to address any disputes that may occur after your status determination.

You’ll need to:

  • consider their reasons for disagreeing
  • decide whether to maintain or change the determination
  • keep a record of your determinations and the disagreement
  • confirm the date your determination is valid from.

Since its implementation, IR35 has generated controversy since many contractors believe that decisions have been made unfairly. Be prepared to provide sound justification for whatever decision you make.


Deduct and pay tax if the rules apply

If you are the fee-payer and it turns out that your contractor is operating inside of IR35, which is the same as an employee, you will need to withhold the appropriate amount of income tax and National Insurance from their salary and submit it to HMRC.

This should broadly be the same share as an employee would pay, but you can find more details on the Government website.


Get in touch

Our door is always open to discuss IR35. It’s a complicated and sometimes laborious process – so it’s worth talking to an accountant you trust.

Talk to us to talk about all things IR35.

Ready to go? We’re excited to hear from you.

Let’s get started, as soon as you’re ready. We’re always up for a chat about how we can support you and your business.

Quickbooks logo
aat logo
ACCA logo