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The IR35 Rules are changing in April 2020 - what you should be doing now if you engage off-payroll workers
- AuthorClare Gilroy-Scott
The IR35 tax rules are changing in respect of individuals who provide their services to medium and large private sector businesses through their own personal service company (PSC) or LLP. Similar rules are already in place in the public sector. Currently, the PSC/LLP is responsible for determining whether the individual they provide to carry out services is working “inside” or “outside” IR35 by assessing the working relationship in practice, and making the necessary PAYE tax and NICs payments.
From 6 April 2020, the end-user client of the services will become responsible for making a status determination (i.e. a determination as to whether the individual is employed for tax purposes or self employed) and for passing that determination and the reasons for it down the supply chain to the entity with which they contract as well as the worker and the PSC (which may be quite complicated if there is an "employment business" in the chain). The “Fee Payer” in the chain, i.e. the organisation that pays the PSC for the individual’s services, will be responsible for paying PAYE tax and NICS if the determination is that the individual is, in fact, employed for tax. End-user clients must take “reasonable care” when making a determination about the employment status (for tax) of a worker as failure to do so will mean that the end-user client is liable for the worker’s tax and NICs. Blanket determinations are not permitted.
Thought will need to be given to this issue in good time prior to the implementation date to ensure that end-users, workers and recruitment agencies are ready for this change, including a full review of the status of all individuals providing services via PSCs or other intermediaries and a review of the contracts by which they engage such workers. End-user clients will also need to put a status determination disagreement process in place to address concerns by a worker or their PSC as to the determination given. The legislation sets out timeframes in which responses must be provided to any notification of disagreement received.
Note that the new rules will not affect the individual’s employment status in terms of employment rights. The PSC/LLP will remain responsible for the individual’s holiday entitlement etc. They are also not applicable to those who are self-employed and do not provide services through a PSC/LLP (where the usual IR35 rules will apply).
Please click here to read my extended article and my top "10 things to do now if you are a business engaging off-payroll workers."
This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.