It has been over one year since the off payroll working rules (IR35) changed in the private and voluntary sectors.
Some organisations who engage contractors in those sectors who didn’t need to apply the rules for 2021-22 as they did not meet the size conditions — may now need to apply the rules.
Ensure you check the Employment Status Manual (https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm10006) for whether the rules apply to your business every year.
This is particularly true if you have:
• become a newly formed business
• been bought by another organisation
• grown in size over the last few years
If you are new to the rules, you should find it helpful to read the steps needed to implement off-payroll working rules (https://www.gov.uk/guidance/prepare-for-changes-to-the-off-payroll-working-rules-ir35).
Thursday, 12 May 2022
Off-payroll working rules (IR35)
Tuesday, 20 July 2021
Off-Payroll Working – Will HMRC accept CEST result?
Since 6 April 2021 large and medium-sized organisations, based on the Companies Act criteria, have had to determine whether or not a worker supplying his services via their own personal service company would be treated as an employee if directly engaged. This replaced the IR35 rules for these larger organisations.
HMRC suggest organisations use their Check Employment Status for Tax (CEST) tool on their website to check the worker’s status, although that is not obligatory. The tool is an interactive database of questions and will normally provide a ruling after 15 to 20 questions depending on the answers given about the contractual relationship.
See: Check employment status for tax - GOV.UK https://www.gov.uk/guidance/check-employment-status-for-tax
HMRC have recently confirmed that they will be bound by the result of the software provided the information is accurate and it is used in accordance with their guidance.
See: ESM11010 - Employment Status Manual - HMRC internal manual - GOV.UK https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm11010
HMRC have also stated that they will not stand by results achieved through contrived arrangements that have been deliberately created or designed to get a particular outcome. They would see that as deliberate non-compliance, and potentially levy financial penalties.
Note that the end-user organisation is required to issue a Status Determination Statement to the worker with a copy to any agency to be passed to any fee payer in the labour supply chain making payments to the personal service company.
Monday, 29 March 2021
Prepare for tax changes if you engage or supply contractors – Off-payroll working rules (IR35)
If you are a medium or large sized non-public sector organisation and you engage contractors, you should now be taking action to prepare for changes to the off-payroll working rules (IR35) coming into effect on 6 April 2021.
For all contractors working through their own limited company, you will need to:
• identify contractors who work in this way
• decide if they are inside or outside the rules
• inform your contractors of their status determination, and any agencies you engage with
• be ready to add them to payroll if needed
• be ready to deal with any disputes
• maintain an audit trail, and test your processes, systems and controls
If you are an employment agency which supplies contractors who work through their own limited company or other intermediary, you need to understand the changes and may also need to take action. You need to:
• identify contractors who work in this way
• be ready to pass on the status determination statement to any agencies you engage with down the supply chain or be ready to put contractors onto payroll
• maintain an audit trail, and test your processes, systems and controls
You can find more information about the actions you need to take to prepare here: https://www.gov.uk/guidance/prepare-for-changes-to-the-off-payroll-working-rules-ir35
Tuesday, 2 March 2021
Get Ready for The "The Off-Payroll" Working Rule
Where large or medium-sized organisations are paying workers via personal service companies (PSC) or agencies they will need to operate new procedures from 6 April 2021.
The new rules will apply to partnerships, LLPs and larger charities as well as limited companies. Only those organisations that would be classed as “small” under the Companies Act criteria will be outside of the new rules.
From 6 April 2021 the end user organisation will be required to determine whether or not the worker would be an employee of the organisation if directly engaged. That determination will need to be communicated to the worker and the agency supplying the worker, if relevant, and is referred to as a Status Determination Statement. The determination notifies the fee-payer that income tax and national insurance is to be deducted from payments to the PSC.
HMRC recommend that the end user organisation should use the Check Employment Status for Tax (CEST) software on the HMRC website to carry out the determination but that isn’t obligatory.
WHAT IF THE WORKER DISAGREES?
Where the worker disagrees with the employment status determination they should contact the end user straight away setting out their grounds for disagreement.
The end user must provide a response within 45 days of receiving the disagreement. During this time tax should continue to be deducted in line with the original determination.
WOULD THE WORKER BE BETTER OFF AN EMPLOYEE?
The new “off-payroll” working rules mean that the worker pays the same amount of tax and national insurance as if they were an employee, but without the same employment rights.
Where possible the worker should consider renegotiating a higher rate of pay to compensate them for the additional tax and national insurance deducted. They may also need to consider what they do with their personal service company going forward.
END USERS CAN BE LIABLE FOR THE TAX NOT DEDUCTED
Where the agency or fee payer lower down the labour supply chain fails to deduct tax from payments to the worker’s company the liability passes up the supply chain such that the end user may be liable. This rule was introduced as HMRC have allegedly been defrauded by some structures set up by employment agencies.
Workers need to be aware of a number of schemes under investigation by HMRC.
End users should carry out due diligence and consider the wording of contracts with agencies supplying workers via personal service companies.
CURRENT IR35 RULES STILL APPLY WHERE END USER IS “SMALL”
The new “off-payroll” rules do not apply where the end user organisation is “small” under the Companies Act rules. Thus, the current IR35 rules will continue to apply, with the onus on the worker’s personal service company to determine whether the worker would have been an employee if directly engaged.
Friday, 5 February 2021
5th February 2021 – Hillmans Weekly Update
Below I have summarised all the main tax related updates we have seen this week.
• Budget Day is 3rd March
• Pension Tax Relief Under the Spotlight
• How trading conditions affect eligibility for the Self-Employment Grant
• Coronavirus Job Retention Scheme has been extended until 30 April 2021
• Get Ready For New Off-Payroll Working Rules (IR35)
If you have any queries about this week’s content, or if you need any assistance please do not hesitate to contact me.
I hope you have a good weekend.
Stay safe and well.
Cheers,
Steve
Steven Hillman BSc (Hons) ACA
Chartered Accountant
Tel: 01934 444100
Monday, 1 February 2021
Get Ready For New Off-Payroll Working Rules (IR35)
This time last year businesses were preparing for important changes to the rules where workers supply their services via their own personal service companies. The start date was then deferred from 6 April 2020 to 6 April 2021.
The new rules are scheduled to apply to large and medium-sized businesses as defined by the Companies Act. Those businesses will be required to consider whether or not the worker would be regarded as an employee if directly engaged and so deduct tax and national insurance from payments as if they were an employee. This change does not apply where the end user is a small business under the Companies Act rules, where the current IR35 rules will continue to apply.
Thus, small organisations will not yet be required to consider the status of the worker or deduct tax.
Please contact us if you are affected by these changes as we may be able to help you with the determination of your workers’ employment status. If you are a worker supplying your services through your own company, we will also be able to advise you on the implications of these changes.
Friday, 31 January 2020
January 2020 Tax Tips & News
Thursday, 31 October 2019
October 2019 Tax Tips & News
To October's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.
If you need further assistance just let us know or you can send us a question for our Question and Answer Section.
We are committed to ensuring none of our clients pay a penny more in tax than is necessary and they receive useful tax and business advice and support throughout the year.
Please contact us for advice in your own specific circumstances. We're here to help!
October 2019
· HMRC publish Agent Update: Brexit Special
· Delay in implementation of domestic reverse charge VAT for construction services
· HMRC win IR35 case
· Tax-free expenses for home-workers
· October questions and answers
· October key tax dates
Monday, 20 May 2019
May 2019 Tax Tips & News
To May's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.
If you need further assistance just let us know or you can send us a question for our Question and Answer Section.
We are committed to ensuring none of our clients pay a penny more in tax than is necessary and they receive useful tax and business advice and support throughout the year.
Please contact us for advice in your own specific circumstances.
We're here to help!
May 2019
· Taxpayer wins IR35 challenge
· Minimum workplace pension contributions rise
· VAT Flat rate scheme
· Rent-a-room tax break remains
· May questions and answers
· May key tax dates
Friday, 1 June 2018
June 2018 Tax Tips & News
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Wednesday, 28 March 2018
March 2018 Tax Tips & News
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Friday, 31 March 2017
March 2017 Tax Tips & News
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