insideKENT Magazine Issue 89 - August 2019 | Page 173

BUSINESS IR35 Off Payroll in the Private Sector Rules Published Words by Rick Schofield, Partner, Wilkins Kennedy THE DRAFT REFORMS FOR THE OFF-PAYROLL LEGISLATION, COMMONLY KNOWN AS IR, HAVE NOW BEEN PUBLISHED BY THE GOVERNMENT AND ARE CONTAINED IN THE FINANCE BILL 2019-20. THE REFORMS TO THE PUBLIC SECTOR WERE FIRST INTRODUCED IN APRIL 2017 AND SUBSEQUENTLY EXTENDED TO THE PRIVATE SECTOR IN THE 2018 BUDGET. THE LEGISLATION WILL COME INTO FORCE FROM 6 APRIL 2020 AND WILL AFFECT THE PRIVATE SECTOR, BUT ONLY MEDIUM AND LARGE SIZED BUSINESSES; THEY DO NOT APPLY TO THE SELF-EMPLOYED. WHERE THE RULES APPLY, THE ENGAGER, AGENCY OR THIRD PARTY PAYING THE WORKER’S COMPANY WILL NEED TO DEDUCT INCOME TAX AND NATIONAL INSURANCE CONTRIBUTIONS (NICS) AND PAY THE EMPLOYER’S NICS. The proposed reforms Guidance Where the individual works for a medium or large sized engager outside of the public sector, through their own personal service company (PSC) and fall within these rules: HMRC will be publishing detailed guidance for organisations and both general and targeted education packages including webinars, workshops and one-to-one sessions with businesses in particular sectors. While these reforms might seem draconian, there is no doubt that businesses will still be able to engage legitimate contractors who will fall outside of the new rules. If you need to discuss any of these changes whether an engager agency or a PSC, please contact us. Improvements will be made to Check Employment Status for Tax (CEST) and tested by legal and operational experts and stakeholders, and will be available later in 2019. This date is now earlier than HMRC originally suggested, so let’s hope it is available before April 2020. [email protected] Good News! Ashford: 01233 629 255 / Canterbury: 01227 454 861 On a positive note, the government has confirmed that the reform is not retrospective and that HMRC will not carry out target campaigns for earlier years where a PSC falls within the new IR35 rules from April 2020. Maidstone: 01622 690 666 / Orpington: 01689 827 505 • The party paying the worker’s PSC (the fee- payer) is treated as an employer for the purposes of income tax and class 1 NICs. • The amount paid to the worker’s intermediary for the worker’s services is deemed to be a payment of employment income, or of earnings for class 1 (NICs) for that worker. • The party paying the worker’s intermediary (the fee-payer) is liable for secondary class 1 NICs and must deduct tax and NICs from the payments they make to the worker’s intermediary in respect of the services of the worker. • The person deemed to be the employer for tax purposes is obliged to remit payments to HMRC and to send HMRC information about the payments using real time information (RTI). Small business exemption Companies that qualify as small businesses will not be required to apply the new rules. In these circumstances the PSC will continue to assess their own IR35 position, as they are required currently, and be liable for their tax and NIC deductions as appropriate. Small businesses are identified by the audit threshold tests: • Turnover – not more than £10.2 million • Balance sheet total – not more than £5.1 million • Number of employees – not more than 50 Local offices: Sandwich: 01304 249 997 Instead HMRC are indicating that they will be ensuring businesses comply with the reform for new engagements. So, an organisation’s decisions about whether workers are within the rules will not automatically trigger an enquiry into earlier years. Next Steps for Businesses Businesses that are caught by the new rules will need to start acting now by carrying out employment status assessments of their contractor workforce and putting in suitable administration systems and protocols. It might also be worth considering outsourcing some or all of the process to reduce the administrative burden. [email protected] www.wilkinskennedy.com wilkinskennedy 173