On Monday, HMRC accidentally leaked its much awaited guidance to the off payroll working legislation (sometimes referred to as ‘IR35’) in the private sector.

The guidance was quickly taken down by HMRC (citing a ‘publishing error’), but not before the guidance was screenshotted by a number of companies.

One of the leaked manuals provided guidance around the ‘reasonable care’ provisions contained in the off-payroll working legislation, which penalise clients for failing to take ‘reasonable care’ when making a status determination (i.e. deciding whether a contractor falls inside or outside of the legislation).

HMRC’s short-lived guidance gave the following example of a client that had not taken ‘reasonable care’ in making a status determination:

A medium, non-public sector, company engages an agency to supply workers. The workers supplied by the agency operate through their own PSCs. The client decided not to take any steps to prepare for the introduction of the off-payroll working rules.

They elect to simply determine that all workers who provide their services through a PSC will be caught by the new rules, because they undertake similar roles and are engaged under similar terms and conditions.

They do this, believing that this will protect them from any liability to pay tax and NICs on payments to those workers. The client passes the same SDS to every worker and the agency. 

Even though the client has determined that the off-payroll working rules apply to the engagement, and passed on the SDS to the worker and agency, as the company has not taken prudent and reasonable steps when making their determinations, liability rests with it. 

 The client has not considered the status of the workers contracting under different terms and conditions so they have not satisfied the condition to take reasonable care. The responsibility for the deduction of tax, NICs and apprenticeship levy, and paying these to HMRC, rests with the client.

The guidance suggests that there is no ‘safe’ way to make blanket determinations across contractor engagements, even if the result is that HMRC receives tax and NICs on the payments made.  

There is no indication when the guidance will be re-published, but the titles of the different manuals are still available to see here.

If you would like any guidance on the off payroll working legislation, and whether it applies to your company, please contact us.