Changes to the IR35 regulations have now been delayed by 1 year due COVID-19. The following changes will instead come into effect from April 2021:
The changes are applicable to medium and large businesses only. This means businesses where at least 2 of the following apply:
- 50 or more employees
- Annual turnover of £10.2 million or more
- Balance sheet total of £5.1 million or more
It is likely that changes will be cascaded down to smaller business in years to come, so for SME’s this is a good time to take note and plan ahead.
Here’s what’s changing:
Employers that engage ‘off-payroll’ workers will become responsible for determining their employment status and paying NI contribution’s for those who are deemed to be employees.
The new rules mean:
- For any person engaged through a Private Services Company (PSC), the obligation to determine their employment status (for the purposes of knowing the corresponding tax rules) lies with the business not the individual.
- The employment status of the person who is being paid through a PSC will affect whether or not the ‘off-payroll working rules’ apply. If they do, then the fee payer (that is the person who owns the PSC) is responsible for itemising the deduction of tax and NI contributions on their invoice, and the client must then pay these to HMRC. The client also has to pay employer NI contributions as well – this will mean an added expense for the client.
- The client will need to report the pay and deductions you make to HMRC using a Full Payment Submission, as you do for workers on your payroll. You should indicate that this person is an off-payroll worker.
- Prior to making these deductions, you must inform the person of your determination of their employment status. You will need to have processes in place for dealing with disagreements about determination, including a sort of appeals process.
Largely this change affects finance teams. Where the regulations refer to the employment status of those whom you engage, the HR Experts can help you navigate what to do.