IR35 off-payroll working rules


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From April 2020, changes are to be made to the off-payroll working rules (otherwise known as IR35). These changes are aimed at the private sector (which includes the charity, care and housing sectors) and follow on from the IR35 reforms already implemented in respect of public sector organisations.

The Government is currently consulting on the proposed new rules and, as with the IR35 public sector reforms, the changes will affect businesses that engage workers through personal service companies (PSCs), or other intermediaries such as partnerships or LLPs.

In summary, the new rules will require you, as the private sector organisation, to assess if the IR35 rules apply to the contracts you enter into with any PSCs, whether hired directly or via third parties. If IR35 applies, you, the private sector fee payer, will be required to apply PAYE and NIC deductions to the payment for the worker services i.e. the individual worker is treated as a deemed employee for tax purposes. In addition, the fee payer must also account for employer’s NIC and, potentially, the Apprenticeship Levy.

This is a fundamental change to the IR35 rules as under the existing regime, any employment tax due under the IR35 rules is payable by the PSC/intermediary and not the private sector end client.

While we await the outcome of the consultation and the detailed legislation, the consultation does confirm that smal' companies will be exempt from the new rules but is consulting on whether that should include other small corporate businesses such as LLPs, trusts and community benefit societies. The consultation also proposes a requirement on the client to provide the worker (and other parties in the supply chain), with the result of the IR35 review and, where requested, the reasons behind the decision.

Private sector businesses should be considering the impact of the changes now. Both the contracts in place, and the reality of the situation, will be relevant to whether a particular arrangement is caught by the IR35 changes.

We have devised a simple set of questions to get you thinking about your off-payroll workers and assess whether IR35 and the proposed new rules could potentially impact you. We'd be grateful if you could respond by 17 May as we will refer to the results of this survey on a non attributable basis in our response to the consultation.

To take our survey please click here.

This article is taken from HR Law - May 2019.

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