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These rules have been in place for many years, but more recently the Autumn Budget 2024 proposed significant changes for umbrella companies often used in the supply of labour. While this doesn’t change the Agency Rules, from April 2026 this will change the risk profile when using umbrella companies, as the responsibility for operating PAYE and NI (including employer NICs) where an umbrella company is used will move to the agency. Alternatively, if there is no agency in the chain, the responsibility lies with the engagers themselves. Off-Payroll Working Rules (OPW/IR35) via intermediaries Chapter 10 of ITEPA 2003, introduced in April 2021 (or April 2017 for the public sector), extended the off- payroll working rules to medium and large-sized private sector end- clients/engagers. The government’s key objective was to ensure that individuals working through intermediaries pay similar taxes to employees. These rules apply when a worker provides services through an intermediary, such as a personal service company, partnership or other intermediary, but would be considered an employee if engaged directly. The rules aim to ensure
that such individuals pay similar tax and NI as employees, by being deemed employees. Where the worker is a deemed employee, this applies for tax/NI purposes, but not automatically for employment law purposes. It’s key to understand this, so as not to provide this group with employee benefits where they don’t apply and/or to treat the individual in exactly the same way as an employee for payroll purposes. Generally, payrolls will be set up with a different employee/worker type to help avoid such problems, though some deemed employers prefer to run separate payrolls. The rules require certain steps to be undertaken by the engager. The key provisions are: Reasonable Care: Engagers must take reasonable care in determining the worker’s status. Failure to do so can result in the client being liable for tax and NI. Status Determination Statement (SDS): Engagers must provide a valid SDS to the worker and the party they contract with, explaining the reasons for the employment status decision. Client-Led Disagreement Process: Engagers must have a compliance process in place to handle any disputes over status determinations.
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GLOBAL PAYROLL MAGAZINE ISSUE 08
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