13% would consider moving abroad
•
These results may come as no surprise, as similar predictions were made prior to the roll out of Off Payroll working in the Public Sector in 2017.
Intermediaries Legislation, commonly referred to as IR35, currently places an obligation on the Contractor’s PSC to assess whether a contract is one of ‘deemed employment’ (i.e. falls inside IR35). Off Payroll working rules moves this obligation to the engaging client. If found to be inside IR35 rules, then the fee payer becomes responsible for operating PAYE and NIC on the ‘deemed employment’ payment.
In a simple arrangement the client and the fee payer will be one and the same body, however a supply chain that includes an agency or umbrella may also exist so establishing who the fee payer is will be important.
The client has several options to help them make a Status Determination and to illustrate their findings and evidence their decision.
They may choose to use the HMRC Check Employment Status for Tax (CEST) tool, which exists currently but is being updated to take on board the criticism it has received since its introduction in 2017. The tool will enable the engager to provide to the feepayer and the contractor (worker) the outcome of their determination and the reasons for their decision. The engaging client does not need to use CEST, they may use alternative methods e.g. professional advisors, in house specialists or specialist software. They will, however, need to demonstrate their reasons and demonstrate that they took reasonable care in reaching their decisions. Under the new rules detailed within the draft Finance Bill the engaging client will need to develop a client-led status disagreement process. Under these new rules both the fee payer and the worker can raise an objection and the client will have 45 days in which to respond. The survey findings pose a question that asks – how many of these contractors are operating IR35 rules now? Are their responses based on fear of different determination outcomes? Or as HMRC have widely stated, they may not have been operating the rules as currently required of them. This is important to know, as from April 2020, nothing will change for contractors who work with engaging clients in who are defined as ‘small’, they will still be required to make a status determination of their contracts as required by Intermediaries Legislation (since 2000).
The new off payroll working reforms will equally impact existing public sector engagements i.e.:
• the need for a client led disagreement process • the need to provide information to the feepayer and to the worker • the transfer of liability where a failure to apply the rules occurs
However, no public sector body will be defined as ‘small’, this definition is restricted to private and voluntary sector engagers who fall outside of the definition of public sector bodies.
The survey results not only demonstrate how contractors would react to an ‘inside IR35’ decision but also pave the way for deeper, more intricate conversations around processes that will be required as from April 2020. The survey also highlighted that some contractors do not trust that their client will apply the correct decision in their case which is a useful reminder that planning for change needs to begin now.
HMRC have begun to update existing guidance and issue new information but much more is yet to follow.
CIPP comment
If you have any comments surrounding the proposed reforms to off-payroll working and in particular, any concerns surrounding preparation for the changes, we would love to hear your feedback. Please email policy with any thoughts you may have. Thank you.
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The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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