New rules will come into effect from 6th April 2020 for off-payroll working (IR35). The draft legislation was published in the Finance Bill 2019-20, which amongst other tax measures, introduced important changes for workers providing services through an intermediary in the private sector, known as off-payroll working. The Chancellor of the Exchequer will confirm the final contents of the bill in the 11th March budget and the changes will affect any contractors who are working through a Personal Service Company (PSC), recruitment agencies as well as large and medium sized end clients. In the latest blog from Caroline Streatfield Bookkeeping with offices in Eastbourne, we look into off-payroll working in more detail, the main changes and what you will need to prepare.
What Is Off-Payroll Working?
This is a term used by HM Revenue & Customs (HMRC) to describe the following situation:
It is when an individual provides their own personal services via their own private company, known as their Personal Service Company (PSC) to an end client where the following test is met: if the worker is actually providing those services directly to the end client, the worker would thereby meet the employment status tests to make them an actual employee of the end client.
Main Changes To IR35
- The end-client is responsible for determining if a contract is inside or outside IR35
- Small businesses are exempt from the new rules
- A Status Determination Statement must be provided by the end-client confirming the IR35 status of a contract
- IR35 status dispute is led by the end-client
- The 5% administration allowance is to be withdrawn although it will continue for PSCs working with small end clients
- Employment tax liabilities are transferred to a relevant person who is any party involved in the payment to a PSC
What Constitutes A Small Business?
- Annual turnover is less than £10.2m
- Balance sheet total is less than £5.1m
- Fewer than 50 employees
What You Need To Do As A Client
It will be your responsibility to decide upon the employment status of a worker and it must be done with every contract that you agree with an agency or worker. Once you have decided you will need to:
- Pass on the reasons for your decision to the worker or the organisation you contract with
- Keep detailed records of the employment status including reasons and the fees paid
- Have processes in place that can deal with any disagreements that may arise
Conclusion
Off-payroll (IR35) working is a large topic and it can be problematic determining if the rules apply. However, from April 6th the emphasis will be on you as an employer to determine the contractor status.
What To Do Next
If you are struggling with off-payroll working, Caroline Streatfield Bookkeeping, based in Eastbourne in East Sussex can help you unravel this complicated status. Call us on 07982 682746 or email us. We will visit your home or workplace within East Sussex and can also work remotely to cover other locations, which are further afield.
Next time, we’ll be talking more about this topic, so be sure to stay tuned to our blog.
