The off-payroll working rules are to be extended to the private sector with effect from 6 April 2020. But what does this mean for your business? Ian Gadie, Business Tax Manager, examines the implications.
The off-payroll working rules (also known as IR35) were introduced almost 20 years ago. They are supposed to ensure that those who work through an intermediary (such as personal service company) who would have been employees if they were directly engaged, pay broadly the same employment taxes as if they were employed.
The Government believes that the rules are being widely abused and, at Autumn Budget 2017, announced plans to consult on how to tackle non-compliance with the off-payroll working rules for workers in the private sector. This consultation concludes on 28 May 2019, and HMRC has stated that a summary of responses will be published later this year, with draft legislation published in the summer.
The new rules propose that small entities (corporate and non-corporate) in the private sector will be exempt from the off-payroll working rules. The consultation proposes that the Companies Act definition of ‘small’ is used to determine which corporates are exempt, and requests responses on how best this test can be applied to non-corporates.
The practicalities of determining the off-payroll working status of workers engaged via intermediaries is also included in the consultation, together with the systems for agreeing and communicating such decisions to the relevant parties in the ‘labour supply chain’.
Even though there is considerable work still to be done, and the Government has other well-publicised priorities, it is clear that HMRC intends to stick to the timetable of applying the new rules from next April.
Private sector entities that will be affected by the new rules should start to prepare for the change. Those that rely on a significant number of workers via intermediaries are likely to be most affected. In addition, businesses will have to consider the impact of these new rules on their operational capabilities, particularly if there is push-back from contractors reluctant to fall within the new rules.
PKF Littlejohn can advise if the proposed new rules apply to your business, and how best to review your engagement of workers via intermediaries to check if you will be responsible for accounting for PAYE and NIC from 6 April 2020.
Please contact Ian Gadie on email@example.com or +44 (0)207 516 2256, or your usual contact at PKF Littlejohn, for further advice.