Employment Status Manual: Off Payroll Working - What is reasonable care?

HMRC recently updated their employment status manual ESM10014 guidance in regard to the basic principles of reasonable care in relation to the Off Payroll Rules. Reasonable care is defined as acting in the way of what would be expected of a prudent and reasonable individual in that position.

The employment manual lists the below examples of reasonable care:

• Accurately applying and keeping record of HMRC’s manual principles.
• Accurately using the Check Employment Status Tool (CEST) tool to achieve a truly reflective result.
• Using and applying HMRC’s guidance.
• Seeking the advice of a professional, qualified advisor.
• Ensuring the individual making the determinations has an effective understanding.
• Checking existing determinations to ensure they remain reflective.
• Making a new status determination if there are changes to a worker’s terms and conditions.
• Checking and reviewing the processes of other parties where it is their responsibility to subcontract the determination.
• A determination can be made for a group of individuals providing they all have the same contractual terms and conditions and apply these in practice.

The guidance further highlights the examples of what does not constitute reasonable care:

• Making ‘blanket decisions’ by determining that all workers fall either inside or outside IR35 without giving consideration to their individual terms and conditions.
• Failing to reconsider determinations when a worker’s arrangements change.
• Lack of sufficient staff training for those responsible for making determinations.
• Inputting inaccurate information into the CEST tool.
• Failing to consider all relevant information.

Aspire comment

There is a huge amount of HMRC guidance on the determination of IR35 and client companies need to have this on-board to promote their taking reasonable care. 

It is imperative to remember that responsibility for the correct determination of tax will always remain with the client unless they are able to show that reasonable care was taken when completing the status determination statement. If they fail to take reasonable care, then they will be responsible for paying any unpaid deduction of tax, NICs and apprenticeship levy to HMRC.

HMRC state that the extent of reasonable care will very in individual circumstances and what is to be expected of a larger, well-established organisation will be much greater than that of a smaller organisation with less advanced systems.

Aspire is able to offer bespoke training for officers in your company on the application of the new rules and what is involved in the making a status determination. If this is something you would benefit from, please call us today.

If you would like to discuss the changes IR35 may have to your business, get in touch on 0121 445 6178 or email enquire@aspirepartnership.co.uk to speak to an advisor.