Dec 5, 2020
Updated 5/12/20
Do you use consultants or other off-payroll workers in the private sector? If so, this is for you.
A bit of background
In the 2018 Autumn Budget, the Government announced a change to the Intermediaries Legislation. Commonly called “IR35”, this tax legislation is designed to tackle tax avoidance by ‘disguised employees’ who are working for organisations via an intermediary such as a personal service company.
In the public sector, it’s been the client’s responsibility to assess the IR35 status of a contractor since 2017. The same is soon going to apply to the private sector. The new rules were delayed by a year and will now come into play from April 2021.
The rules will apply to all types of companies, except for those that fall within the Companies Act definition of a ‘small-sized’ company. In broad terms a small-sized company is one which meets at least two out of these three criteria: 1) Annual turnover is less than £10.2m, 2) Balance sheet assets are under £5.1m and 3) it has less than 50 employees. There are a few quirks to this definition so it’s worth confirming whether it applies.
If you’re not a small sized company and you’re using consultants or other off-payroll workers via an intermediary it will be your responsibility to use HMRC’s employment status tests to assess these workers and ensure PAYE and employee’s NIC is deducted and paid over to HMRC from payments made to any workers that fall within the scope of the new rules.
You’ll also need to account for the employer’s NIC and possibly the Apprenticeship Levy. If you don’t carry out these assessments correctly, any resulting PAYE/NIC liabilities could rest with the company/fee payer, i.e. you, along with interest and potential penalties.
Time is ticking and to make sure you’re prepared and compliant, you need to take these changes into account now to avoid later disruption. Identifying whether you have any workers providing their services through an intermediary would be a great start. This includes agencies, limited companies, personal service companies and umbrella companies. You should consider setting up a process to ensure you comply and make sure key stakeholders are aware of the impact including the workers themselves.
This is a change that is going to have an impact for many businesses and we are on hand to help you understand the new rules, their impact on your business, and precisely what you need to do. And by putting a plan in place now, you’ll save a lot of hassle down the line.
