1. Home
  2. IR35 FAQ's
  3. General IR35
  4. What is Reasonable Care and how does it Impact my Assessment?
  1. Home
  2. IR35 FAQ's
  3. What is Reasonable Care and how does it Impact my Assessment?

What is Reasonable Care and how does it Impact my Assessment?

IR35 legislation states that an end hirer must take ‘reasonable care’ in assessing all contracts, to establish whether the individual would be seen an employee when carrying out the necessary work. If they fail to take reasonable care, the end hirer will be responsible for calculating the deemed direct payment, paying it over and reporting the tax and NICs that result.

All end hirers are responsible for completing an SDS for their contractors. The law states that they must do this with reasonable care, to prevent them from not looking at each individual case properly.

If an organisation makes a blanket ban decision that all contractors work for them via an individual PSC are IR35 captured, this would certainly be seen as failing to take reasonable care. 

The definition of ‘reasonable care’ in this context is acting in a way that would be expected of a prudent and reasonable person in the end hirers position. For example, they should keep records of the employment status test and apply appropriate judgement when using HMRC’s CEST tool. It is also assumed that they will seek professional advice to help them in any areas where they are unclear.

An SDS is therefore deemed invalid, unless it contains the following:

  • A statement as to whether or not you would be an employee or an office holder if you were directly engaged by the end hirer.
  • Clear reasons for coming to that conclusion
  • Reasonable care in coming to that conclusion

Part of taking ‘reasonable care’ is having a robust review framework in place, to give you a clear understanding of how that decision has been reached. If it’s not clear, or you believe the conclusion is flawed, you are legally entitled to challenge the decision with an independent review of your own.

Updated on 1st April 2020

Was this article helpful?

Related Articles

Need Support?
Can’t find the answer you’re looking for? Don’t worry Brookson are here to help!
Request FAQ