In January the government launched a four-week review of the changes to IR35 “off-payroll” working rules scheduled to come into force in April, as the result of mounting criticism about the way they will operate. The review is scheduled to conclude by mid-February and will see the government hold a series of meetings with stakeholders representative of those affected by the changes.
It is unlikely that there will be a significant U-turn, but there may be scope for the impact of the legislation to be reduced in terms of the range of contractors to whom it will apply, or the size of businesses who will be obliged to operate it. The new rules are currently scheduled to apply to large and medium-sized businesses as defined by the Companies Act.
The government will also carry out a further review of the enhanced CEST tool designed to assist businesses in checking employment status and public sector bodies’ experience of applying the rules since 2017.
Now that the General Election is out of the way, the tax changes in the draft Finance Bill scheduled to take effect from April 2020 are now more likely to go ahead.
The key tax measures “in limbo” until legislated in Finance Act 2020 are:
– Extending the “off-payroll” working rules to the private sector
– Restricting R&D repayable credit for SMEs
– The proposed 2% reduction in P11d car benefits
– Limiting CGT private residence letting relief
If the changes to CGT private residence letting relief go ahead from 6 April 2020, it may be worth considering the disposal of a property that currently qualifies for this relief before 6 April 2020. The “off-payroll” working rules will almost certainly proceed, even if not from 6 April 2020, and thus businesses and workers affected should prepare for the planned changes.
Contact us if you want to know how likely this is to impact on your business by calling 01522 815100
Where large or medium-sized organisations are paying workers via personal service companies or agencies they will need to operate new procedures from 6 April 2020.
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 2020 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 agency supplying the worker so that income tax and national insurance is deducted from any payments.
The end user organisation should use the Check Employment Status for Tax (CEST) software on the HMRC website to carry out the determination. A copy of the determination should also be given directly to the worker.
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 they should continue to apply the rules in line with the original determination.
RADIO PRESENTER WINS IR35 PERSONAL SERVICE COMPANY CASE
The extension of the “off-payroll” working rules to the private sector mentioned above is planned for April 2020 but in the meantime tax tribunal decisions are still being decided against HMRC.
In a recent case involving a radio presenter working for TalkSport, it was decided that the presenter would not have been an employee if directly engaged. A key factor was that the the level of control over the presenter fell far below the sufficient degree required to demonstrate a contract of service.
The accountancy bodies have been lobbying the government to take the decision of the judges in this and the recent case involving Lorraine Kelly into consideration when they update the CEST software used to determine employment status.
If you would like more information on the above, please contact a member of our team on 01522 815100.
The draft Finance Bill clauses issued for consultation on 11 July include legislation to extend the “off-payroll” working rules to the private sector from 6 April 2020. These changes will have significant implications for workers providing their services through personal service companies and also the end user organisations that engage such workers.
End users will be required to determine whether the worker would have been an employee if directly engaged and hence the new rules apply to the services provided by the worker via his or her personal service company. This will be a significant additional administrative burden on the large and medium-sized businesses who will be required to operate the new rules. The current CEST (Check Employment Status for Tax) online tool will be improved before the proposed start date.
If you need any further information please contact our Payroll Team on 01522 815100