Be aware of planned changes regarding “off payroll workers”!

Friday, April 26th, 2019

Here at Copia Wealth & Tax Limited, we believe that remaining pro-active is a crucial part of what we do. That is why we work hard to to keep our clients informed regarding any changes to tax, accounting or legislation that might adversely affect them or their businesses.

One area that is currently of concern, particularly where the business makes use of sub-contractors (termed “off payroll workers”), is the proposed changes to previous IR35 legislation that were recently applied to the public sector but are now being looked at for roll-out to the private sector. 

Whilst details are still to be finalised, it is of benefit to be aware of the proposals as they currently stand.

Government consultation paper issued

In the Autumn Budget, the Chancellor announced that the “off payroll” workers rules that currently apply in the public sector would be rolled out to the private sector from April 2020. Consequently, the government has issued a consultation paper setting out the proposed tax and national insurance changes that are likely to impact on individuals that supply services through “personal service companies”.

It is proposed that end users will be required to determine whether the rules apply to the services provided by the worker via his or her personal service company, and this likely to represent a significant additional administrative burden on the large and medium-sized businesses that will be required to operate under these new rules. The current Check Employment Status for Tax (or “CEST”) online tool is apparently going to be improved before the proposed start date.

No changes likely for small businesses

The consultation paper indicates that small businesses will, however, continue to be dealt with under the current IR35 rules, i.e. with the worker and his or her personal service company effectively self-assessing whether the rules apply to each engagement.

The Government has confirmed that it intends to use the existing Companies Act 2006 definition of “small”; that is where a business satisfies 2 or more of the following criteria, being;

• Its annual turnover is £10.2 million or less

• Its balance sheet total is £5.1 million or less 

• It has 50 or fewer employees

Watch out for new obligations

These new obligations; that is, to determine whether the rules apply, deduct tax and national insurance, and report payments directly to HMRC under the Real Time Information (or RTI) legislation, will fall directly on the agency or intermediary that makes payments to a personal service company where that end user is itself a large or medium-sized business as defined above. There will also now be an obligation to pass details of any status determination up and/or down a labour supply chain. 

In short, any liability for tax and national insurance will become the responsibility of the entity that then pays a personal service company. However, if HMRC is unable to collect the tax from that entity, the liability will pass up the labour supply chain thus meaning those entities further up the supply chain should carry out their own due diligence in order to “police” compliance.

Always get professional advice

For business owners concerned about these changes or for those concerned generally about the impact of IR35 and sub-contractors, it is now even more vital to take advice and/or seek guidance on any solutions which could mitigate any potential tax risk. 

Call Copia Wealth & Tax Limited, Wolverhampton today on 01902 783172 to book an appointment with one of our friendly experts or alternatively, just click HERE and one of our team will get back to you as soon as possible to explore more about how we may be able to guide you and your business through all of this.