The “off-payroll” working rules to the private sector will be in operation from 6 April 2020.
This will mean workers providing their services through personal service companies and also the end-user organisations that engage such workers, will be required to determine whether the worker would have been an employee if directly engaged and hence the new rules apply to the services provided by the worker via his or her personal service company.
The draft Finance Bill issued for consultation on 11 July includes the current CEST (Check Employment Status for Tax) online tool would be improved before the proposed start date.
Small businesses outside new obligations
However “small businesses” will be outside of the new obligations, with services supplied to such organisations being able to continue to be dealt with under the current IR35 rules, with the worker and his or her personal service company effectively self-assessing whether the rules apply to that particular engagement.
The definition of “small business” is linked to the Companies Act 2006 definition, with the business satisfies two or more of the following conditions:
- Annual turnover of £10.2 million or less
- Balance Sheet total of £5.1 million or less
- 50 employees or less
The liability for tax and national insurance will be the responsibility of the entity, paying the personal service company. However, if HMRC are unable to collect the tax from that entity, the liability will pass up the labour supply chain, thus encouraging those entities further up the supply chain to carry out due diligence.
Please get in touch on 0161 249 5040 if you would like to discuss how the proposed changes are likely to impact you and your business.