Off-Payroll Working Rules for Private Sector

The draft Finance Bill clauses issued for consultation on 11 July 2019 include legislation to extend the “off-payroll” working rules to the private sector from 6 April 2020. These changes will have significant implications for workers providing their services through personal service companies and for the end user organisations that engage such workers.

End user organisations will be required to determine whether the worker would have been an employee if directly engaged.  If so, the new rules will apply to the services provided by the worker via his or her personal service company. This will be a significant additional administrative burden on the large and medium-sized businesses who will be required to operate the new rules. The current CEST (Check Employment Status for Tax) online tool will apparently be improved before the proposed start date.

“Small” Employers Excepted

“Small” businesses will be outside of the new obligations and services supplied to such organisations will continue to be dealt with under the current IR35 rules, with the worker and his or her personal service company effectively self-assessing whether the rules apply to that engagement.

The draft Finance Bill confirms that the definition of “small” is linked to the Companies Act 2006 definition.

This is where the business satisfies two or more of the following conditions:

• Annual turnover of £10.2 million or less
• Balance Sheet total of £5.1 million or less
• 50 employees or less

There will be an obligation to pass details of the status determination down the labour supply chain. The liability for tax and national insurance will be the responsibility of the entity paying the personal service company. However, if HMRC are unable to collect the tax and national insurance due from that entity, the liability will pass up the labour supply chain.  This will encourage any entities involved further up the supply chain to carry out due diligence.

Please contact us  if you would like to discuss how the proposed changes are likely to impact on your business.

Photo by Drew Beamer on Unsplash