NOVEMBER 2019 | PAYROLL ON POINT
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IR35ANDOFF-PAYROLLWORKERS New legislation being introduced from April 2020 will result in businesses in the private sector having to consider the employment status of individuals providing services through intermediaries - including their own personal service company (PSC) or similar. As a result, payroll costs are likely to increase for any business that does not qualify as an exempt small business. WHERE DO RESPONSIBILITIES FALL? The ‘Client’ is the organisation in the supply chain that is ultimately receiving the individual’s services, and is responsible for determining whether the individual would have been regarded as an employee if they were engaged directly. In cases where the worker is a deemed employee, the ‘Fee-Payer’ is treated as the employer for the purposes of income tax and NIC. The Fee-Payer is the organisation paying the PSC for the worker’s services. For example, an individual supplies IT services to A Ltd through their PSC. In this case A Ltd is the Client as it is receiving the individual’s IT services. As the party responsible for paying the individual’s PSC, A Ltd is also the fee-payer. It must deduct PAYE and NIC from the payment made to the individual’s PSC: from April 2020 onwards, RTI returns will incorporate a separate indicator to allow HMRC to identify payments for such off-payroll workers. INFORMING THE PARTIES Where the new rules apply, the Client must inform both the party they are engaging with and the worker of their decision (whether the worker is a deemed employee or not), detailing the reasons for its determination. Where necessary, each entity should inform the next entity in the chain of the decision. The Client will also need a process for managing disputes – they must respond within 45 days if a worker contests the decision. X X Whether they fully understand their entire supply chain for the provision of labour and not just the immediate party they contract with? X X Are they the ‘Client’ or ‘End User’? If so, do they have the skill set to carry out status assessments internally or is additional training/resource required? X X Are they the ‘Fee Payer’? If so, are their systems able to manage with the communication between purchase ledger and payroll? X X What are the financial implications – if PAYE and NIC is to be accounted for, who will bear the cost? NEXT STEPS Businesses need to consider: CLIENT/ END USER INTERMEDIARY – PSC ITWORKER A LTD SUPPLY WORKER PAYMENT CONTRACT
To discuss the implications for your business, please contact your normal employment tax contact or mark.seaden@bdo.co.uk .
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