When should an organisation carry out a status assessment for a contractor under the IR35 rules?

Under the IR35 rules (also known as the off-payroll working rules) in place from 6 April 2021, an organisation within the scope of the rules (the client) is required to assess the employment status of contractors that it engages via an intermediary to provide services.

To meet its IR35 responsibilities, the client must carry out an assessment and issue a status determination statement before making payment for the contractor's services (ie before the first payment after 6 April 2021, for services provided on or after that date).

In practical terms, the status assessment should be carried out before the engagement begins, as part of the process of agreeing the contract. An assessment that the engagement is inside IR35 (ie the contractor would have had employee status had they been engaged directly rather than through their intermediary) may mean that the contractor seeks to renegotiate their fee, to compensate them for the deduction of tax and national insurance.

If the contractor or fee payer (for example an agency paying the contractor's fees) appeals an assessment, it is sensible for the client to carry out a new determination based on any additional information that has been supplied.

During a long engagement, it is good practice for the client to repeat the status assessment on a six-monthly basis, to check that the working practices and the contractor's personal circumstances have not changed.