Off payroll working regime set to launch in the private sector from April 2020
04Off Payroll working regime in the private sector to launch in April despite ongoing Treasury review
The Government has confirmed that, despite its plans to review the Off-Payroll tax rules, it will not postpone the April 2020 implementation of the legislation in the private sector.
The introduction of these off payroll working rules to the sector is thought to be one of the most significant changes to the way that contractors and consultants, operating through personal service companies (PSC’s), are paid and taxed and follows on from the original introduction of this regime to the public sector in April 2018.
The rule change means that engagers (those who use the services of consultants and contractors), rather than workers, will be responsible for determining whether an engagement falls within the IR35 rules.
If an engagement is found to fall within the rules then the contractor will be regarded for tax purposes as a ‘deemed employee’ and the engager will be responsible for applying the correct tax and National Insurance contributions (NICs) under their PAYE regime.
The change only affects contractors working for medium and large businesses, but it will be the engager and not the contractor held liable if HM Revenue & Customs determines a contractor’s IR35 status has been incorrectly assessed, which could result in significant costs.
Are you a medium or large business? Check the criteria to the draft Off-Payroll working legislation here: Employment Status Manual
It is understood that this latest review into this controversial change won’t significantly affect the proposed legislation, which is why the Government still intends to roll it out in April.
A Treasury spokesperson said: “The review will determine if any further steps can be taken to ensure a smooth and successful implementation of the reforms, which are due to come into force in April 2020.”
The review has already made an initial announcement regarding what payments the rules apply to and from when, comfirming that they will only apply to payments made for sevices provided on or after 6 April 2020.
The full review should conclude by the end of February 2020 and will also assess whether greater support can be offered to ensure that the self-employed outside the scope of the rules aren’t affected, particularly as many have found themselves under blanket IR35 determinations under the current rules in the public sector.
Financial Secretary to the Treasury, Jesse Norman, stated: “We recognise that concerns have been raised about the forthcoming reforms to the Off-Payroll working rules. The purpose of this consultation is to make sure that the implementation of these changes in April is as smooth as possible.”
It is important that businesses affected by the rule changes seek advice to ensure they are compliant with the new requirements. To find out how we can help with this, whether as a potentially affected contractor or engager, please contact us.