Changes to off-payroll working or IR35
HMRC have released a reminder update regarding those who work through an intermediary, off-payroll working or IR35, rules which will change next year.
From April 2020 the rules for engaging individuals through personal service companies will change.
If you have concerns about this change please contact our Tax Team on 01379 640555.
How to prepare for the new IR35 rules
HMRC have detailed below the process with which you need to follow in order to ensure you are prepared for this change.
- Look at your current workforce (including those engaged through agencies and other intermediaries) to identify those individuals who are supplying their services through personal service companies.
- Determine if the off-payroll rules apply for any contracts that will extend beyond April 2020. You can use HMRC’s Check Employment Status for Tax service to do this.
- Start talking to your contractors about whether the off-payroll rules apply to their role.
- Put processes in place to determine if the off-payroll rules apply to future engagements. These might include who in your organisation should make a determination and how payments will be made to contractors within the off-payroll rules.
You can find out more here about these changes and who they apply to https://www.gov.uk/topic/business-tax/ir35 or alternatively contact our tax department to discuss your concerns.
What is Off Payroll working in the Private Sector?
The off-payroll working rules:
- apply if a worker provides services to a client through an intermediary, but would be classed as an employee if they were contracted directly
- make sure that workers pay broadly the same tax and National Insurance contributions as an employee
Please note as well as applying to businesses it could also apply to charities.
What is an intermediary?
An intermediary will normally be a worker’s personal service company, but could also be a partnership, a managed service company or an individual.
As an intermediary you will need to make an employment status determination for the worker to see if the off-payroll working rules will apply.
If the rules apply you’ll need to calculate a ‘deemed employment payment’. This is the amount deemed to be the income of the worker, after some deductions and employer National Insurance contributions have been removed. Find out more about the deemed employment payment here.
The off-payroll working rules are decided for each engagement your worker enters into. If during an engagement there is a change in the terms then you’ll need to reconsider if the rules continue to apply.
You’ll need to:
- pay the employer National Insurance contributions to HMRC
- pay any tax and the employee National Insurance contributions due, at the end of the tax year
- take into account the deemed employment payment when paying Corporation Tax, paying dividends or operating the Construction Industry Scheme
Your worker will need to report information about these engagements to HMRC on their Self-Assessment tax return, and pay any other Income Tax and National Insurance contributions that are due.
There are different rules for Private and Public sectors as well as clients and intermediaries. If you are unsure which rules apply to you or your business please give us a call on 01370 640555.
We work with a wide range of businesses throughout Norfolk Suffolk and Essex. If you have concerns about any of the issues raised in this blog please get in touch. We will help you to ensure you don’t receive unnecessary penalties.
Contact us now on 01379 640555 and have a chat with our Tax Team.
Want to know more? Call us on 01842 760 007 or email email@example.com