For small, scaling businesses in the UK, bringing on contract HR or talent acquisition professionals offers incredible flexibility and access to specialised expertise. However, you might have heard about IR35, also known as the Off-Payroll Working Rules, and perhaps it sounds a bit daunting. Don’t let it be! While understanding these rules is important, partnering with the right agency can turn a potential headache into a seamless process, ensuring your IR35 compliance for businesses.
What is IR35 and Why Does it Matter to Your Business?
IR35 was introduced by HMRC to ensure that individuals who work like employees, but through their own limited company, pay broadly the same Income Tax and National Insurance as direct employees. It’s about making sure everyone pays their fair share, regardless of how they’re engaged.
Why is this important for your business? Since April 2021, for most medium and large-sized private sector clients (and public sector clients since 2017), it’s your responsibility as the hiring business to determine a contractor’s IR35 status. If HMRC decides a contractor is actually an ’employee for tax purposes’ (meaning they are ‘inside IR35’), and you’ve incorrectly assessed them as ‘outside IR35,’ your business could face unexpected tax bills, interest, and penalties. This is why achieving robust IR35 compliance for businesses is crucial.
Day Rates and IR35: Understanding the Relationship
Contract HR and Talent Acquisition professionals often work on a day rate. It’s important to remember that the day rate itself doesn’t determine IR35 status. Instead, HMRC looks at the reality of the working relationship, not just what’s written in a contract. They consider factors like:
- Control: How much say do you have over how the contractor does their work? If you dictate their hours, location, and methods, it might suggest an employment relationship.
- Substitution: Can the contractor send a qualified substitute to do the work if they’re unavailable? A genuine contractor usually has this right.
- Mutuality of Obligation (MOO): Is there an ongoing expectation for you to offer work and for the contractor to accept it? This can point towards employment.
- Integration: Is the contractor treated like a regular employee, integrated into your core team, and seen as ‘part and parcel’ of your organisation?
- Financial Risk: Does the contractor bear any financial risk (e.g., investing in their own equipment, liability for poor work)?
If a contractor is deemed ‘inside IR35,’ it means they’re treated as an employee for tax purposes. This can impact their take-home pay and means your business (or the agency paying them) will need to deduct Income Tax and National Insurance at source. This often leads to contractors requesting higher day rates to compensate, which can affect your project budgets.
Navigating IR35 with Confidence: How Peeq Protects Your Business and Ensures IR35 Compliance for Businesses
For small, scaling businesses looking to leverage contract HR talent, navigating IR35 doesn’t have to be a source of anxiety. At Peeq, we specialise in making this process straightforward and secure for you, ensuring seamless IR35 compliance for businesses.
We understand that your priority is finding the right talent, not becoming an IR35 expert. That’s where our robust, insured process comes in:
- Initial Status Determination with Qdos: When we receive a new contract vacancy, we partner with Qdos, an independent IR35 assessor. Qdos will conduct an initial status determination with your business. You’ll answer a series of questions related to the role, and we’ll get a provisional ‘inside’ or ‘outside’ IR35 status. The cost for this initial assessment is covered by Peeq and is included in our fee – we don’t pass this onto our clients.
- Candidate-Specific Assessment: Once we find and appoint a suitable candidate for the contract, they will complete a more in-depth questionnaire related to the specific assignment. This provides a comprehensive view from the contractor’s perspective.
- Final, Insured Status Determination: Combining the data from both your business’s questionnaire and the candidate’s assessment, Qdos then issues a final, definitive Status Determination Statement (SDS) – clearly stating whether the engagement falls ‘inside’ or ‘outside’ IR35. Working with Qdos means we are fully compliant, and crucially, we are insured against the status determination we provide.
This comprehensive, insured process means that when you partner with Peeq, you significantly minimise the risk of bringing on board a day rate contractor. We handle the complexities of IR35 compliance for businesses, ensuring you’re protected and can focus on what you do best: growing your business.
Conclusion
Contract HR and TA professionals are a powerful asset for your scaling UK business, offering the agility and expertise you need without the long-term commitment. While IR35 is a critical consideration, it doesn’t have to be a barrier.
By choosing a recruitment partner like Peeq, who provides expert guidance and an insured compliance process, you can confidently engage the best contract talent, ensuring your business continues to grow while remaining fully compliant with HMRC regulations. Let us take the headache out of IR35, so you can focus on your success.
Contact us today to find out how we can help – email info@pe-eq.com or phone 020 7100 7888
