What is reasonable care?
Dave Chaplin, CEO of IR35 Shield explains the importance of reasonable care when making IR35 status determinations. He outlines HMRC’s guidance, the risks of negligence, and how using specialist advisors helps businesses meet compliance and avoid tax liabilities.
Reasonable care is something which clients should be taking when conducting status determinations and producing their status determinations or “SDS”.
If reasonable care is not taken then the agency does not become the fee-payer, which means they cannot make deductions and the client remains the one bearing the tax risk.
Not taking reasonable care causes all sorts of problems and it is very much in the interests of all parties to take reasonable care and make accurate assessments.
There is a considerable body of case law around reasonable care, the concept which is based around negligence, and in tax law the flip side of not taking reasonable care is being careless - of which there are many tax cases to learn from.
In essence it means making decisions and acting prudently, given the knowledge that someone has, or should have, for their professional ability.
HMRC have issued some useful guidance on reasonable care in relation to off-payroll, and have said it consists of accurately applying the status law, using professional advisors, reviewing processes and monitoring engagements to check and detect any change in status during engagements.
Reasonable care is not met where blanket determinations are made, evidence is ignored or new determinations are not made when material changes to engagements occur.
The good news is that firms using specialist advisors should easily meet the requirements for reasonable care.
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