CORONAVIRUS (COVID-19) LATEST UPDATES HERE

EXTENSION OF OFF-PAYROLL RULES

HMRC ANNOUNCEMENT
IR35 REFORMS DELAYED
UNTIL APRIL 2021

ARE YOU PREPARED FOR OFF-PAYROLL REGULATIONS?
FOR MORE INFORMATION CONTACT US TODAY ON 03303350400

Extension of the off-payroll rules into the private sector

The IR35 rules in the private sector are changing.

In brief the IR35 rules apply where an individual works through an intermediary, such as a personal services company, and provides their services to an end user client. If that intermediary did not exist, but the individual looked like an employee of the client for tax purposes, then that assignment is deemed to be ‘inside IR35’ and the individual’s pay should be subject to PAYE tax and national insurance. Employers’ national insurance will also be due.

Due to non-compliance, the Government changed the application of the IR35 rules in the public sector in April 2017 – these are known as the ‘off-payroll rules’. The Government believes the time is now right to extend the off-payroll rules into the private sector and has published its consultation on the detail. That consultation closed on 28 May 2019 and draft legislation is expected in summer 2019. The off-payroll rules will then apply in the private sector from 6 April 2020.


The off-payroll rules from April 2020

The off-payroll rules which currently apply in the public sector will also apply in the private sector, albeit with some changes.

Small companies exemption

Importantly the off-payroll rules will not apply where the end user client is a small company, as defined in the Companies Act 2006 (CA 2006). Companies in small groups (as defined in CA 2006) will also be exempt. The Government are consulting on which tests to apply for non-corporate entities and have suggested two options (page 8 of the consultation document).

Where organisations are exempt, the existing IR35 rules (where the intermediary is responsible for applying the rules) will continue to apply. Finally when an organisation becomes or ceases to be small in an accounting period, for the purposes of the off-payroll rules that change will apply from the start of the tax year following the end of that accounting period, irrespective of whether the organisation is incorporated or unincorporated. It is not clear from the consultation how a recruitment business is meant to establish whether its client is a small company or not, and therefore which rules apply.

A company which meets two or more of the following criteria

  1. annual turnover of not more than £10.2 million,
  2. balance sheet total of not more than £5.1 million or
  3. no more than 50 employees.
Passing status decisions through the supply chain

End user clients will have to assess the IR35 status of each assignment where the services are provided by an individual working through an intermediary. Under the reforms, they will have to pass that decision and their reasons for coming to that decision, to the off-payroll worker as well as the party they contract with (usually the recruitment business). Given that some supply chains can be lengthy and complex the consultation asks some questions about how to simplify the information flow.

Check employment status for tax tool (CEST)

The end user client will have to understand the IR35 rules and use an appropriate assessment tool to reach an accurate status decision. In 2017 the Government introduced CEST which is an online tool. CEST has come in for some criticism and the Government has committed to working with stakeholders to enhance the tool. GENIUS will work with HMRC on this.

Resolving disagreements over status

Off-payroll workers will have a right to receive the status decision, and the reasons behind it, directly from the end user client. In addition, the consultation proposes a client-led status disagreement process to help resolve disagreements about the status decision reached. It is proposed that a minimum set of requirements will be set out in the legislation.

Liability

There are a couple of different points to consider. Firstly, where the fee-payer is off-shore, the fee-payer’s responsibilities move up the supply chain to the next UK based entity. Secondly, the Government proposes that the liability should initially rest with the party that has failed to fulfil its obligations until such time as it does meet its obligations at which point liability moves down the chain. However if HMRC are unable to collect the outstanding tax liability from a party, the consultation proposes that the liability should transfer back to the first party or agency in the chain, and if that fails, then HMRC will pursue the client. The consultation does not propose personal liability for directors, office holders or associates of the fee-payer.

All of these raise separate issues which we will explore with members in the coming weeks and address in our consultation response.

NEXT STEPS

Clients should start to assess whether they will be affected or exempt from the off-payroll rules, because they are a small company. Those who will be affected should start to assess who amongst their contractor population might be affected by this change. They must also identify who within their organisation should make the status decisions and ensure that those individuals understand how to asses status. Agencies will have to ensure that they have the payroll capabilities to manage payments to contractors (we understand from the public sector roll out that this is far from straightforward and some agencies have incurred significant development costs).

RESOURCES

For further information contact the Genius Money team who can organise a time to visit.

The information contained in this page is provided as general background information and should not be taken as legal advice.

LATEST NEWS

TAX MEASURES ANNOUNCED TO HELP INDIVIDUALS COPE WITH THE FINANCIAL IMPACT OF COVID-19
Posted on: 03 Apr 2020 at 10:25:37
It is in the Government’s interests to support taxpayers and businesses through this crisis, who will in their turn support the economy once restrictions are lifted. Tax measures are likely to be used as a tool for support. Announcements are coming thick and fast, and we will keep updating thi...
FCA TO ENFORCE CORONAVIRUS LOAN AND CREDIT CARD PAYMENT FREEZES
Posted on: 02 Apr 2020 at 12:28:48
The Financial Conduct Authority (FCA) has proposed temporary measures to support customers with credit products such as overdrafts, loans and credit cards. The financial watchdog has set out a number of temporary measures to help consumers dealing with coronavirus financial shock including payment f...
DAILY CORONAVIRUS CASES FALL 10 PER CENT
Posted on: 30 Mar 2020 at 14:45:46
Daily coronavirus cases have dropped for the first time in weeks, according to the latest figures. Stocks rallied as the number of daily coronavirus cases fell 10 per cent on Sunday compared to the previous day.  However, the gains were not sustained and the FTSE 100 is down 0.87 per cent this...
PM ADDRESS TO THE NATION ON CORONAVIRUS
Posted on: 29 Mar 2020 at 13:54:18
The following is a transcript of the Prime Ministers speech, exactly as it was delivered. Good Evening, The coronavirus is the biggest threat this country has faced for decades – and this country is not alone. All over the world we are seeing the devastating impact of this invisible killer. An...
DEFERRAL OF VAT PAYMENTS AS A RESULT OF COVID-19
Posted on: 27 Mar 2020 at 16:45:41
The Chancellor announced a VAT payments deferral on 20 March to support businesses with cash flow during the COVID-19 pandemic.This means that all businesses with a UK VAT registration have the option to defer VAT payments due between 20 March and 3‌0‌‌ June.You therefore have until 3‌1‌‌ March 2021...
CITB SUSPENDS LEVY PAYMENTS
Posted on: 27 Mar 2020 at 16:02:13
The CITB has suspended the issue of its levy bills, due for payment in 2020, for an initial period of three months. The bills will subsequently be issued for the full year.The delay will provide immediate financial relief to construction employers during the coronavirus crisis, the CITB&nb...