Off-payroll working and umbrella companies good practice

HMRC has developed and updated three sets of guidance to help people involved in OPW/IR35 understand what HMRC considers good practice. The three sets of guidance are aimed at end clients, recruitment agencies, and contractors respectively. The guidance contains examples of good systems and processes that will help to reduce the risk of error when determining a worker’s status for tax. It also covers different scenarios and organisational structures that may be caught by the off-payroll working rules. 

For end clients:

HMRC has issued new guidelines for compliance, Help to comply with the reformed off-payroll working rules (IR35). The guidelines are intended to help end clients understand what HMRC considers good or poor practice when preparing for and making status determinations for off-payroll workers, and working with others in the supply chain. This should assist end clients to:

• ensure that all workers that provide their services through an intermediary are correctly identified and considered under the off-payroll working rules; and
• gain assurance that income tax and national insurance contributions are being deducted by the correct operation of PAYE when off-payroll workers are deemed to be employed.

For recruitment agencies:

HMRC working with HM Treasury and the Department for Business & Trade has also published new guidance Responsibilities for employment businesses who work with umbrella companies. This guidance is intended to help recruitment agencies and other employment businesses to: 

• understand their legal responsibilities;
• support the umbrella company workers in their supply chains; and
• protect their business by reducing their risk of non-compliance. 

Umbrella companies will usually be the worker’s employer and will be responsible for paying the worker’s salary/wages and operating PAYE.   

For contractors/workers:

HMRC has updated its guidance for umbrella company workers Working through an umbrella company. It explains how and what a worker is paid and how a worker can check their pay when employed as a temporary worker by an umbrella company. It also now includes checks that workers can do to identify and avoid fraudulent umbrella companies. 

Read more:

ICAEW’s Tax Faculty is recognised internationally as a leading authority and source of expertise on taxation. The faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.