Payroll insight
Ian Holloway MSc FCIPP, head of legislation and compliance, Cintra
which is submitted alongside therefore this is unlikely to change. There will inevitably be some difficulty with calculating the correct earnings period for NICs, particularly where work is irregular and the ‘exact percentage method’ is to be applied or where a contractor works on two concurrent contracts, one within and one outside the scope of the new provisions. Invoices that are submitted late and in bulk will add to the difficulties in arriving at the right earnings period. Neil Tonks: The payment needs to be entered into the payroll system somehow, but whether the source document is an invoice or a timesheet is inconsequential. They’re just two ways of representing the data as far as we’re concerned, so clients only need to change to a timesheet if they need to do this for their own reasons. The NICs earnings period is driven by the frequency of the payroll the individuals are placed into, so this is also under the control of our clients. Karen Beckett: We will continue to accept invoices as this is a way in which to identify the payments to be made via payroll under the rules. A new element has been set up to make payments and we would expect the invoice to differentiate between payments and expenses. Duncan Groves: I’ve not spoken to a client that is considering moving from an interesting. I guess that if the parties agree that payments should be made monthly (to coincide with the payroll) then the correct earnings period would always be monthly. Ian Hodson: We have implemented a two-stage process where the arrangement continues to be the procurement of services; however, once the personal service company flag is indicated the invoice will come to payroll for payment. Payroll then have their own process for gathering the additional personal information needed to correctly make the payment to the supplier. This is where the legislation makes it difficult, as procurement cannot really collect all details such as a personal National Insurance number as part of their supplier engagement process and also be responsible for the data protection needs around storing and destroying. This is why invoice to a timesheet approach. The earnings period question is
private sector, and certainly should not underestimate the work involved if applied to the private sector. As best practice, any organisation should review the payments they make and ensure that they meet HMRC compliance. Duncan Groves: Extending the rules to the private sector would create a level playing field – this is one of the biggest criticisms of the legislative changes. However, I can’t see it happening. Chancellor Hammond couldn’t even get the Class 4 NICs increase through! Helen Hargreaves: I’m not sure that the problems would be majorly different if these rules were to be extended to the private sector, but the impact would naturally be much more widespread. That being said, I think most of us are fully expecting that it is only a matter of time before the private sector is also covered by this type of legislation. Ian Hodson: I don’t think you can really underestimate the fact that there are real resourcing needs around implementing the legislation in respect of time, people and technology. I am sure there are a number of lessons learned already in respect of the roll out to the public sector; however, I struggle to see how the private sector will cope with the resource requirements of the legislation and be willing to foot the cost of it. I would rather see HMRC taking more of a lead over the status classification of individuals and it should be more about them determining if deductions need to be withheld rather than the risk being sat with an employer. I am not certain that as a model this will work on a practical scale and along with the previous legislations of auto-enrolment, real time information and the apprenticeship levy I would expect to see a backlash from the private sector over identifying these relationships without a greater sense of central clarity. Ian Holloway: The same problems will exist but will be multiplied to a massive extent. Jas Jhooty: We see the imposition of these new regulations on public sector bodies as a test bed for the inevitable widening of scope to all employers including the private sector over the next few years. Frankly, we do not think this government cares about the chaos it is causing by introducing poorly planned legislation that takes no account of
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we felt it was better that payroll as the experts in this information and with clear processes for closing and archiving records kept control of gathering the additional information on an as-and-when basis. We are also often finding that suppliers are using different bank accounts for their IR35 payments than for their main business banking in order to reconcile transactions their side. Ian Holloway: This is all unclear at the moment, as the full impact has not been fully recognised, let alone digested. In the short-term, we are not aware of any immediate changes to employers carrying on with using the existing invoicing methods. Do you envisage any different problems if these new intermediaries rules were extended to the private sector? David Paul: The jury is still out on whether these rules will be extended but in the interests of treating all taxpayers with equal fairness, which used to be a cornerstone of HMRC’s Taxpayer’s Charter, this has to be a real possibility. The problems will be largely the same if these rules are extended to the private sector and many of the lessons will already have been learned but we would certainly expect more resistance and greater representation from many stakeholders in the private sector. Neil Tonks: I think it’s inevitable that the rules will be extended at some point. The current arrangement makes attracting good contractors into the public sector harder and/or more expensive, especially if their skills are equally relevant to the private sector. At some point, the government will extend the arrangement to the private sector in the interests of ‘levelling the playing field’. Karen Beckett: Smaller organisations should find the process of identifying those affected easier than the larger organisations. The larger organisations should begin preparing for the possibility of the new rules applying to the
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| Professional in Payroll, Pensions and Reward |
Issue 32 | July/August 2017
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