COMPLIANCE
Off-payroll working – changes imminent
John Harling, principal employment taxes consultant at PSTAX, outlines the changes and urges public bodies to prepare
A lmost a year since reforms to the off-payroll working (OPW) rules (still often referred to as ‘IR35’) were due to come into effect, the delayed legislation is set to apply from 6 April 2021. Public bodies should be aware of the significant changes involved. Whilst the main headlines regarding OPW have been about extending the end-client responsibilities to much of the private sector, all sectors – including the public sector – have a new raft of responsibilities that they must adhere to in order to avoid unwanted tax and National Insurance contributions (NICs) liability and penalty charges. Many public bodies had made preparations in anticipation of the date originally earmarked for the rule changes (April 2020), but it still appears to be the case that not all organisations in the sector are as prepared as they should be. The changes are a specific set of requirements that, unless followed, automatically mean that any NICs and PAYE (pay as you earn) liability lies with the end-client (the public body) until such time that those actions are taken. As a starting point, public bodies are reminded that OPW specifically refers to the engagement of intermediaries and not individual ‘sole traders’. Whilst there is still an obligation to assess the correct employment of sole traders, the specific OPW rules only apply where the
engagement is with another entity, usually a small limited company (personal service company), a partnership, or even through another individual who is not the worker. In the case of personal service companies, the OPW rules must be followed where the worker has a material stake in the company (5% or more). In the case of a partnership, the rules apply where the worker is entitled to 60% or more of a share of the profits or the majority of their income is derived from the end user. Public bodies are of course already accustomed to many of the OPW rules following major changes introduced in April 2017. However, the latest changes present new obligations that require systems and procedures to be updated imminently. So, what are the main changes and actions required? ...that agency then passes it on to the next agency in the chain, and so on. Status determination statement Firstly, in cases where the OPW rules are deemed to apply (in scope), the legislation requires the end-client to issue what is known as a status determination statement (SDS) to the worker and
either the worker’s intermediary (where the intermediary is engaged directly by the public body) or a third party, e.g. an agency (where the contract is between the end client and that party). The law also requires that a SDS be issued in cases where the end-client incorrectly determines that the OPW rules do not apply, as this can provide protection to the end-client should the matter be challenged by HM Revenue & Customs (HMRC). Therefore, whilst the law does not strictly require the SDS to be issued in cases where the end-client has correctly determined that the OPW rules do not apply (out of scope), it is strongly recommended that this be done. Please note that the SDS must be issued before the contract commences and that the end-client is responsible for deducting and accounting for PAYE/NICs until it has been issued. In terms of the information required on the SDS, there is no official HMRC form or recommended template. However, the statement must include the following information: ● name of intermediary company ● name of worker ● name of agency (if applicable) ● contract start date ● contract end date ● date SDS completed ● name of person completing the SDS. The end-client must also provide its
| Professional in Payroll, Pensions and Reward | March 2021 | Issue 68 28
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