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Jonathan Greenhalgh Contract, Blue Collar...

IR35 & Off-Payroll working, Whats changed & why should you care?



IR35 is a piece of legislation that's been in place since the Gordon Brown prime ministerial era. Put simply it is a definition of whether someone working "Off-payroll" should be deemed as an "Employee" for Tax and NI purposes.
Day to day this most commonly affects contractors that operate as a Limited Company (Ltd), It does not generally effect temporary workers that work either Umbrella, PAYE or CIS.
So what's changed and why should you care?

Ultimately it is important to state there is no change to the definition within the legislation HMRC has instead issued "intent" to change guidelines on the interpretation of the legislation. Before April 2020 determining whether someone is acting in according with the legislation is the responsibility of the Ltd Contractor

The consensus is that post-April 2020 it will be the responsibility of the End-user, Agency and Ltd Contractor to assure this determination. It's important to note a version is already live in the Public sector which has seen significant disruption but with no known extra-legal case.

So what's the problem?

There are a significant number of UK companies that utilise a flexible specialist workforce/supply chain, and it is the lifeblood of the UK economy. It is safe to say that not all UK companies are aware of either the legislation and/or whether they have Ltd contractors. To re-engage a Ltd company contractor via any other solution will significantly increase business costs

HMRC are also as yet to release their full guidance on this interpretation which is due "Summer" 19, and they are required to also update their assessment tool "CEST" not due until October 19, it is currently unhelpful.

What are you doing to help?

It's important to understand that "off-payroll" risks of "deemed" employment have been in place for some time. Therefore the core risk itself hasn't changed.

However, we are rolling out an early stage plan to reduce as much risk for our clients as possible, including…

  • Investing in a new onboarding system to analyse the key risks at the start of an assignment with more visibility for you
  • Improve our contract framework in combination with APSCo (governing body) and a top 10 UK employment legal advisor
  • Creating educational video content for clients and contractors to understand the key principles of contracting properly through the engagement
  • Working in partnership with our clients directly by attending client sites to advise senior management teams
  • Introduce a new "Tax deducted at source" payroll model in combination with our PAYE & Ltd models

What can I do? (Note this is only the author's thoughts and by no means should be considered legal advice)

  • Ensure you understand your supply chain capabilities and whether you have Ltd companies
  • Ensure you have agencies who have strong reliable legal and financial footprints
  • Ensure your agency supply chain have the experience to offer PAYE employed temp worker contracts AND the ability to deduct tax / NI at source (over half in the UK don't!!)
  • Once released take time to understand the full guidelines from HMRC
  • Note key proposed dates in the diary are the end of July 19 (Guidelines) and end of October 19 (CEST assessment tool)

Following these dates, Emp Sol will propose the solutions we can offer from April 2020 against our assessment & understanding. It is advisable to take legal interpretation for your own company and review supply chain contracts in place.