Off-payroll working rules are changing

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03 March 2020

Off-payroll working rules, also known as IR35 have been in place since 2000. From 6 April 2020, changes to IR35 will come into effect for both businesses and contrators.

Jonathan Moughton, explains the changes and how they may affect you or your business.

Who will IR35 changes affect?

These changes will affect medium and large organisations who employ contractors (or self-employed people) to carry out one off or on-going projects.

You will also be affected if you are a contractor providing services to one of these companies through an intermediary (such as your own limited company).

These changes demonstrate that HMRC are continuing to focus in on employment status for contractors engaged through intermediaries.

What are the IR35 changes?

Previous rules saw contractors themselves responsible for declaring their employment status for tax purposes.

With these changes, the onus will now be shifted to the businesses hiring contractors.

Companies that meet the criteria will need to decide the employment status for those working off-payroll and provide the worker with their decision.

This is called a 'Status Determination Statement'. If the worker disagrees with this decision, the company will have 45 days to respond.

If it is decided that the worker is employed, it becomes the company’s responsibility to pay income tax and national insurance contributions to HMRC before the worker is paid. The company will also be liable for employers PAYE tax and national insurance.

HMRC is providing support through their Check Employment Status for Tax (CEST) tool. This tool is designed to help you determine the tax status. The output 'CEST' generates can be used as your Status Determination Statement.

It is important to note that IR35 changes will only effect how tax is paid.

If a worker is deemed employed for tax purposes, they will still not receive statutory payments or employment rights from the company.

Get in touch with our tax advisors for further information on how this may affect you or your business.