Pro Tip: Keep Robust Records to Avoid Compliance Risks

This pro tip is for businesses that hire contractors

Context

Record-keeping is crucial under the off-payroll working rules (IR35). HMRC expects businesses to demonstrate robust processes, accurate determinations, and compliance with tax regulations. Failing to keep comprehensive records can expose your organisation to penalties and additional liabilities.

*Pro Tip* - Develop a systemised approach to record-keeping for all engagements where off-payroll rules are relevant.

Here's what you should track:

1. Communication with Supply Chain

   • Document all communications with agencies or intermediaries to confirm whether workers are engaged through their own intermediaries.
   • Maintain records of assurances that payments and tax have been treated correctly on applicable workers.

2. Status Determinations

   • For every determination, record:

     • The status conclusion reached by the client.
     • The reasons for the conclusion.
     • Supporting evidence such as outputs from assessment tools.
     • The Status Determination Statements shared with the supply chain.

3. Disagreements

   • If a worker or deemed employer disputes a determination, keep:

     • The original determination.
     • Correspondence detailing the disagreement and evidence provided.
     • Your final decision, including any updates to status determinations.

4. Payments

   • Maintain records of gross fees paid to workers or intermediaries, along with evidence of tax deductions and NI contributions where applicable.

Why this matters

Accurate records not only simplify HMRC compliance checks but also help mitigate risks in case of errors. HMRC may consider incomplete records as evidence of carelessness, leading to extended liabilities and penalties.