Struggling to navigate IR35 and off-payroll working rules? With HMRC increasing its scrutiny, insurance brokers must ensure contractor engagements are compliant. Aisling McCartan, Senior Manager in our Human Capital team, explains your responsibilities and how to reduce risk with practical, expert-led solutions.
Why this matters for insurance brokers
Contractor use is widespread across the insurance sector – as is the need to carefully manage compliance with Off-Payroll Working (OPW) rules.
Since reforms shifted responsibility to end-clients, brokers are now accountable for determining employment status, applying PAYE where required, and demonstrating compliance to HMRC.
Where contractor engagements are common, these rules continue to present operational and administrative challenges. Despite this complexity for organisations, HMRC continues to remain active in this area, with ongoing enquiries and issuing penalties where organisations fail to meet their obligations.
What are the Off-Payroll Working Rules (IR35)?
Originally introduced in 2000 to tackle “disguised employment”, IR35 targets individuals who operate like employees but supply services via intermediaries, such as personal service companies (PSCs).
The off-payroll working rules were introduced to the public sector in 2017 and extended to the private sector from April 2021 onwards. For insurance brokers, this means greater accountability and compliance obligations across contractor populations and supply chains.
Key IR35 responsibilities for insurance brokers
- Determine if OPW rules apply
In the private sector, this depends on whether the organisation meets the “medium and large” company thresholds under the Companies Act.
- Identify contractors and engagements in scope
If the rules are applicable then organisations should carry out a review of the contractor population, focusing on contractors who provide their services through their own intermediary (such as PSCs, partnership) and who are not on the payroll.
This review should also extend to the organisations labour supply chains so that engagements with recruitment agencies, umbrella companies or third parties are also captured.
- Carry out employment status assessments
As mentioned, the key responsibility for the end-client is to assess whether the contractors would be an employee or self-employed if engaged directly. HMRC’s Check Employment Status for Tax (CEST) can be used for this purpose.
HMRC have said that it will stand by a CEST determination, as long as the information inputted remains true and accurate. However, it is worth nothing that CEST may not always provide a determination, and it is therefore recommended that an organisation uses a combination of CEST and its own judgment when making status determinations.
Where a contractor provides services through a PSC that would otherwise be performed by an office holder such as a Director or Non-Executive Director, the engagement is automatically treated as “inside IR35”, and PAYE must be operated.
- Demonstrate “reasonable care”
The end-client is required to take reasonable care when making status determinations. HMRC have stated that failure to do so means that the responsibility for the deduction of tax and NICs, and the payment of the apprenticeship levy will rest with the end-client.
Examples of behaviours that would indicate an end-client has not taken reasonable care include:
- Applying a blanket determination (e.g. treating all PSC contractors as inside IR35 without carrying out an assessment)
- Grouping contractors together despite differences in roles or working arrangements
- Failing to reconsider determinations where there has been a material change in circumstances
- Lack of training or guidance for those responsible for making determinations
- Outsourcing the SDS process without confirming the accuracy of that conclusion and the reasons for it.
- Communicate the determination
Once the assessment has been made, it’s the responsibility of the end-client to pass the determination to both the contractor’s PSC and any intermediary involved in the contract such as a recruitment agency. This must include the outcome and the basis of the assessment decision.
- Apply PAYE where required
Where a contractor is determined to be inside IR35, the fee payer (which depending on the engagement may be the end-client or an intermediary such as a recruitment agency) is responsible for applying PAYE. This includes:
- Deducting PAYE and employee National Insurance
- Accounting for Employer National Insurance
- Applying the Apprenticeship Levy (if applicable).
- Implement a Dispute Process
Organisations are required to have a formal process in place to handle challenges to status determinations.
Where a contractor disputes the determination, the organisation must:
- Review the determination, and
- Respond within 45 days.
- Maintain robust records
Maintaining accurate records is essential, particularly in the event of an HMRC enquiry. Organisations should retain SDS, supporting information such as contracts and evidence of communications to the relevant parties in the contractual chain. These records should typically be kept for 6 years.
Managing HMRC risk: A pragmatic approach
A common concern among insurance brokers is the risk of HMRC compliance checks leading to overly cautious approaches, including avoiding contractor engagements altogether.
However, fear of HMRC scrutiny should not prevent organisations from engaging with the talent they need.
In practice, organisations with robust, transparent processes are well positioned. Where processes clearly demonstrate a low risk of non-compliance, HMRC enquiries are often resolved efficiently with minimal disruption.
The key is not to avoid risk entirely, but to manage it effectively through strong governance, documentation, and consistent application of the rules.
How we support insurance brokers with IR35 compliance
Our Human Capital specialists work closely with insurance firms to provide practical, end-to-end support, including:
- Assessing whether the OPW rules are applicable
- Performing status assessments
- Designing compliant processes
- Supporting HMRC enquiries and risk reviews.
If you would like to understand your risk exposure or strengthen your IR35 compliance framework, please contact Aisling McCartan or Liam Condron.
