HMRC sets expectations on IR35 good practice – a new era?

19 January 2024

In November 2023, HMRC issued its latest Guideline for Compliance note (GFC4) entitled ‘Help to comply with the reformed off-payroll working rules (IR35)’. The guidelines extend to fourteen parts and are intended to demonstrate what HMRC regards as best practice in relation to compliance with off-payroll working rules. 


GFC4 is primarily intended for public sector and medium-sized and large private businesses using the services of off-payroll workers operating through intermediary entities (most commonly personal service companies), following the introduction of revised administrative requirements for the intermediaries’ legislation (often referred to as the IR35 rules) from April 2017 for public sector entities and from April 2021 for medium-sized and large businesses in the private sector. The guidance provided will also be of interest to recruitment businesses and other third-party providers of labour.

The guidelines contain examples of what HMRC considers to be good end-to-end systems and processes, and it is stated that following them will help businesses reduce the risk of making errors and incurring penalties.

Businesses of all sizes should, in any event, consider whether workers they use who are operating as self-employed sole traders are genuinely self-employed, following the separate HMRC tools and guidance on employment status. 

The key expectations

GFC4 includes different scenarios and examples of expected compliance processes for medium-sized and large businesses that, since 2021, are required to assess the employment status of off-payroll workers they engage. As a high-level summary, some of the key HMRC expectations of such businesses and public sector organisations engaging off-payroll workers are as follows.

  • It is important to consider and document who in the engaging organisation is responsible for making off-payroll worker status decisions and ensure that they are aware of their responsibilities.
  • Businesses should ensure that they have robust initial and ongoing training in place for employees who need to understand and operate the rules. 
  • Processes should be in place to ensure that individuals who are working through their own intermediary entities are identified before an arrangement is entered into. 
  • Detailed and up-to-date records should be maintained of all off-payroll workers, including records of all the employment status determinations made.
  • Remember that office holders, including non-executive directors, are always subject to the operation of income tax and National Insurance contributions (NICs) through PAYE on income from their office, even if they are engaged through their own intermediary such as a personal service company.
  • Once a status assessment has been made for an off-payroll worker, the decision should be set out in a formal status determination statement that must be issued to the worker (and the recruitment agency supplying the worker if applicable).
  • If a status determination statement has not been provided and a worker is then recategorized as employed for tax purposes, the engaging business is responsible for any PAYE liabilities.
  • Processes should be adopted to identify circumstances where there have been material changes to the working conditions or the contractual terms of an off-payroll worker. In such situations the original determination may no longer reflect the reality of the engagement and a new status assessment will need to be undertaken.
  • Procedures should be in place to enable any disagreements raised by off-payroll workers in relation to a status assessment made within the required 45-day period to be properly considered and responded to.
  • Systems and processes should be in place to make sure that PAYE is operated in accordance with the off-payroll working rules where a worker is deemed to be subject to IR35.
  • Regular reviews of the business’s end-to-end systems and processes in relation to compliance with the off-payroll working rules are expected to be carried out. 
  • Finally, it is reiterated in the guidelines that whether or not an organisation chooses to outsource its responsibilities, it will remain accountable for ensuring that the off-payroll working rules are operated effectively.


As we approach the third anniversary of the introduction of the revised IR35 administrative rules for medium-sized and large businesses, it is clear that HMRC is ramping up its compliance activity in this area. It is important that these businesses and public sector organisations review the GFC4 guidelines and ensure that their end-to-end processes and procedures are in line with HMRC’s expectations. 

The GFC4 guidelines are very much focused on organisations that engage workers through intermediaries and are subject to IR35. Nevertheless, all businesses should remember that they have obligations to ensure that any self-employed individuals working for them directly are genuinely self-employed. Failure to do so could result in significant liabilities. 

For more information, please get in touch with David Williams-Richardson or your usual RSM contact.