To recap on the Government’s intended changes, the plan is to extend the off-payroll working rules that currently apply to the public sector, to the private sector from 6 April 2020.
That means that from this date, medium and large businesses, recruitment agencies and third parties will need to decide whether the IR35 rules apply to an engagement with individuals who work through their own company.
Where it is determined that the rules do apply, the business, agency, or third party paying the worker’s company will need to deduct income tax and employee NICs and pay employer NICs.
What will be covered in the consultation
The Government does not intend to review alternative approaches, and will instead review the finer details ahead of the launch of these new rules.
In particular, it intends to review stakeholder views on the scope of the reform, the information/training requirements for those impacted and to address status determination disagreements.
Concern for recruiters
“This is an area of concern for recruitment agencies. Particularly if we look at how public-sector bodies have been addressing this since it was introduced for them in 2017. There has largely been a forgoing of proper assessments, instead assuming that all contractors are within scope of the new legislation. This has led to lower incomes for contractors and subsequently pushes them to find arrangements to minimise their losses, often resulting in large tax bills later”. Leighton Bower, Partner, Rouse Partners.
Read and respond to the consultation
We are encouraging recruitment agencies and intermediaries to put forward their opinions to the consultation which is open until 28 May 2019.
The closing dates for your input/comments is 11.45pm on 28 May 2019
A summary of responses will be published later this year. The consultation will inform the draft Finance Bill legislation, which is expected to be published in Summer 2019. The reform will come into force from 6 April 2020.
How to prepare?
To prepare for changes to the off-payroll working rules from 6 April 2020, the government recommends to:
- Look at your current workforce (including those engaged through agencies and other intermediaries) to identify those individuals who are supplying their services through PSCs.
- Determine if the off-payroll rules apply for any contracts that will extend beyond April 2020. You can use HMRC’s Check Employment Status for Tax service to do this.
- Start talking to your contractors about whether the off-payroll rules apply to their role.
- Put processes in place to determine if the off-payroll rules apply to future engagements. These might include who in your organisation should make a determination and how payments will be made to contractors within the off-payroll rules.