At Budget 2018, following earlier consultation, the government did, as anticipated, announce reforms to the off-payroll working rules in the private sector. The rules seek to ensure that individuals who work like employees but through an intermediary to a client in the private sector will also operate in a similar manner to that operated in the public sector. From April 2020, where an individual is engaged by a medium or large-sized business and works through an intermediary, the engaging business will become responsible for assessing the individual’s employment status. If the rules apply, the business, agency or third party paying the individual’s company will be responsible for deducting income tax and NICs through PAYE as for employees, and paying employer NICs. Full details of this latest policy delivery have yet to be finalised and a consultation is due to be published in the coming months. The employment status of the individual is a key element of consideration as the rules do not apply to the genuinely self-employed. The Check Employment Status for Tax (CEST) service is available to help the engager to determine whether the off-payroll working rules apply. HMRC plan to work with stakeholders over the coming months to improve CEST and associated guidance before the reforms come into effect. A briefing sheet was published by HMRC as part of Budget 2018. The existing rules will continue to apply for engagements with small businesses. The definition of a ‘small business’ will be based on the Companies Act 2006 definition of a small company. CIPP comment We are waiting for the next stage of consultation to be published which will seek views on the detailed operation of rules in the private sector and although there are still unknowns about the reforms, there is much that we do know as it appears to be the intention that this should broadly be following the path of the public sector reforms. Although the CEST tool will be evolving, getting to know it in its current form could be beneficial. April 2020 is not far away and we would urge employers, if you haven’t already, to be preparing and to be having conversations with internal stakeholders and contractors about the processes that will need to be put in place. Good communications are going to be key to a successful delivery of these latest reforms. Private sector lessons from BBC IR35 off-payroll working rules implementation Pinsent Masons wrote an interesting article at the end of last year which discusses the valuable lessons for the private sector regarding the BBC’s engagement with PSCs (Personal Service Companies). It is worth a read as the BBC's experience will be relevant to many large and medium sized businesses both as a lesson as to how difficult it can be to apply the new rules and a warning as to what can happen if the implementation goes wrong. The article also reiterates that although April 2020 seems a long way away, for businesses with large numbers of freelancers engaged through PSCs, establishing systems to ensure compliance with the new rules will be a major exercise and planning needs to start now. Many large businesses have become reliant on using PSCs as off- headcount and off-payroll workforce and changing the cultural assumptions will take time.
The article can be accessed here.
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IR35 Forum minutes published 29 January 2019
The minutes from the 21 November 2018 meeting of the IR35 Forum have now been made available on GOV.UK.
Members of the forum raised a number of concerns regarding the reform to the off-payroll working rules in the private sector from April 2020, including: • Blanket rulings • Capacity of the private sector to implement the reform • Detailed preparation cannot be completed until legislation and guidance have been produced • Increase in administrative burden for agencies providing workers
The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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