Off Payroll Working Rules in the Private Sector

January 23, 2020

The government announced at Budget 2018 that it would reform the off-payroll working rules (also known as the intermediaries legislation, or IR35) for all medium and large organisations in the private sector. From 6 April 2020, all such organisations will be responsible for assessing the employment status of individuals who provide services to them through an intermediary, typically, a Personal Service Company. Where an individual is considered to be a "disguised employee" within the scope of the Intermediaries legislation, commonly known as "IR35," the entity paying the intermediary will be responsible for withholding tax and National Insurance Contributions.

There are a number of criteria to consider when reviewing whether the IR35 legislation applies and no one factor will determine this as it is the ‘overall appearance’ of the engagement that determines the result. When conducting a review to determine status it is important to remember that both the Contract for Services and the actual working practices should be considered.

HMRC introduced a 'Check Employment Status for Tax' (CEST) tool that a worker, end client or agency can use to determine whether an engagement falls within the scope of IR35. The original CEST tool was updated in November 2019.

Draft legislation for Finance Bill 2019- 20 has been published to reform the off-payroll working rules for engagements in the public sector and in medium or large-sized organisations outside the public sector. This draft legislation included a power to make secondary legislation to allow HMRC to recover unpaid PAYE liabilities from other relevant parties in the labour supply chain, namely the first UK-based agency in the chain, or alternatively from the client receiving the individual’s services.

On 22 January 2020 HMRC announced a technical consultation on the draft secondary legislation inviting interested parties to comment on the technical detail. The consultation will run for 4 weeks commencing from 22 January 2020 ending on 19 February 2020.

With this review intended to conclude by 19 February, which may be seen as optimistic, this only leaves less than two months to the beginning of the new tax year. As the Budget will not take place until 11 March 2020, the subsequent Finance Bill containing the legislation for these rules will only be published a little over three weeks before they are due to take effect.

Although there are calls for the introduction of the rules to be delayed it would be prudent to work on the basis that the rules will apply from 6 April 2020 and to have in place procedures to ensure compliance.

Sarah would be delighted to discuss in more detail how she can assist and offers an initial one-hour meeting on a no commitment basis.

This article was written by
Sarah Lawrence-Williams
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