MEMBERSHIP INSIGHT
On your behalf
Policy team update
Diana BruceMCIPPdip, CIPP senior policy liaison officer, sets out details of important consultation on off-payroll working and theminimumwage
Off-payroll working in the private sector The latest development was the
the off-payroll working rules will work from April 2020; and the obligations and responsibilities of all parties involved in the labour supply chain. ● Defining the scope of this reform – Concerns were raised during the previous consultation (http://bit. ly/2GX24We) that extending reforms to the private sector would have a significant impact – which potentially gained nothing from a compliance perspective – on small private sector organisations; and this has been accepted by HMRC. The definition of a ‘small company’ is defined within the Companies Act 2006 (‘the Act’). HMRC has highlighted the qualifying conditions which if met, would exclude a company from these reforms. The qualifying conditions will be met by a company in a year in which it satisfies two or more of the following requirements: ❍ annual turnover – not more than £10.2 million ❍ balance sheet total – not more than £5.1 million ❍ number of employees – not more than fifty. However, in recognition that not all organisations will have incorporated and thus need to comply with the requirements of the Act, these two
options have been presented to be able to identify and exclude unincorporated organisations: ❍ either fifty or more employees or turnover in excess of £10.2 million ❍ both fifty or more employees and turnover in excess of £10.2 million. For both incorporated and unincorporated entities when they become small, or cease to be small, it is proposed that change will apply from the start of the tax year following the end of that accounting period. This is an area which will require clear guidance from HMRC, provided in a timely manner to ensure that organisations will be clear as to whether they are captured by the reforms. Information published at Budget 2018 predicted that 1.5 million businesses will not be impacted by the reforms – but that isn’t to say they won’t need to be aware of them. ● Addressing non-compliance – Off-payroll reform in the public sector requires the engaging client to determine the status of the contract. It also requires the fee-payer to deduct income tax and National Insurance contributions (NICs) as if the contractor were an employee. In simple working relationships the engager and the fee-payer are one and the same. However, more complex supply chains were identified as a cause of concern as they relate to the right to obtain the determinations to each party within the supply chain. HMRC seek to address these problems within the
consultation (http://bit.ly/2VEmDPf) published by HM Revenue & Customs (HMRC) in March 2019 which asked for views on proposals to deliver off-payroll working rules to the private sector from April 2020. The consultation closed on 28 May 2019. The policy team produced a survey to gather views and opinions together with experiences of the earlier reforms. We also held a think tank roundtable last month in Manchester, to which full, fellow and Chartered members were invited to attend. Given that time is strictly limited between now and the implementation date of April 2020, the consultation took the opportunity: ● to clarify HMRC’s response to concerns that have been raised about the check employment status for tax (CEST) service (http://bit.ly/2VF2ZTl) ● to provide details about what education and support HMRC intend to provide to all affected parties, in an attempt to ensure readiness for April 2020. The intention is that the consultation document should give organisations and individuals certainty around both: how
...two options have been presented to be able to identify and exclude unincorporated organisations...
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| Professional in Payroll, Pensions and Reward | June 2019 | Issue 51
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