This video provides guidance for Hiring Managers in Schools regarding IR35 compliance.
IR35 is tax legislation designed to combat tax avoidance by workers supplying their services to clients via an intermediary, such as a limited company.
The worker would be classified as Inside IR35 if they would be deemed an employee if the intermediary was not used. Workers classified as inside IR35 should pay income tax and National Insurance Contributions (NICs) in the same way as if they were employed directly by the council. This is why HMRC introduced IR35 legislation.
Who decides the IR35 status?
Since April 2017, it is a legal requirement for public sector organisations to determine whether a worker is inside or outside the IR35 legislation.
This determination must be undertaken prior to the worker being engaged.
We take this responsibility is delegated to the School. It is recommended that the school appoint a dedicated person to manage IR35.
How to determine the IR35 status
Schools can easily determine the IR35 status of a worker by:
- completing the BCC Programme of Works form
- completing HMRC’s Check Employment Status for Tax (CEST) online questionnaire
The CEST questionnaire will advise the school of the IR35 status. HMRC will stand by the result given by the online questionnaire unless they find that the information provided was not accurate. The CEST questionnaire must be completed by the designated person with the schools as the end client. It is not permitted for the worker to complete the questionnaire on the schools behalf.
HMRC monitor the use of the online questionnaire, and therefore schools are not permitted to perform the check repeatedly to attempt to obtain a specific result.
Intentionally providing inaccurate information will result in significant fines from HMRC, which will be recharged to the schools cost centre.
What to do once you have made a determination
Once you have completed the two documents you must do one of the following:
- request the vendor to be set up via finance as a direct vendor if deemed to be outside
- confirm in writing to the elected payroll bureau or umbrella client that you deem the worker to be inside. Then forward the details of the umbrella client or payroll bureau to be set up as a vendor
- you must inform the worker of the IR35 outcome. If asked, you must explain to the worker how the determination has been reached. The CEST questionnaire will assist you in doing this
- if the worker disputes their IR35 status, they must discuss this directly with HMRC (see below). They must not influence the decision or outcome from the hiring manager’s assessment
- in line with normal procedures, the hiring manager must retain the programme of works and CEST questionnaire for seven years
Further information, disputes and support
Buckinghamshire County Council cannot provide technical tax advice.
The HMRC website provides further information about IR35.