We previously blogged in April that the Government had launched a consultation into its proposed changes to IR35, or the off-payroll working rules, and how they apply to the private sector.
This consultation has now concluded and draft legislation has been published which set outs the changes that will take effect from April 2020. These changes include:
- If the work the individual is doing counts as employment for tax purposes, the “fee-payer”, meaning the entity who pays the individual’s personal service company (PSC), rather than the PSC itself, has to make tax deductions and pay NICS.
- The end client has to make a status determination statement, which states whether the work the individual is doing counts as employment for tax purposes;
- The status determination statement must be communicated to the individual and the fee-payer. The end client has to supply reasons for its determination if requested;
- Until the status determination statement is passed on, the client will be liable for any tax or NICs due to HMRC;
- HMRC has the power to decide whether the status determination statement is correct. There are fines of up to 100% of lost revenue for incorrect status determination, in addition to liability for the tax and NICs; and
- Where the individual disagrees with the status determination, they may make representations to the client and ask them to review their decision. The client then has 45 days to respond or they will assume the responsibilities of the fee-payer and be liable for any tax or NICs due.
The Government has announced that further specific guidance will follow in due course and have been updating their Check Employment Status for Tax (or CEST) tool in order to assist businesses in their determinations.
The April 2020 deadline is fast approaching, and it is advisable that businesses start preparing now, for example by reviewing how many contractors your business employs and assessing whether they could be caught by IR35.
How can we help?
Clarkslegal has been helping businesses prepare for the upcoming IR35 changes and will be hosting two free seminars on IR35 and the potential impact it will have on businesses and their people.
More information about the seminars, taking place in both Reading and London, and the registration pages can be found here.