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
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