As we draw closer to the introduction of the new off payroll working rules on 6th April 2020, we are now receiving a substantial number of queries from organisations regarding the actions that need to be taken and how business models can be adapted to mitigate some of the negative impacts.
The imminent Government review of the impact of the changes is not expected to make any major revisions and therefore, action needs to be taken now to avoid HMRC demands for payments.
Our November 2019 blog, IR35: A Taxing Matter
, set out the background of the changes and now is the time to check the following actions are in place to ensure IR35 compliance, minimise disputes and manage resourcing budgets:
- Carry out status determination assessments to ascertain “deemed employment” for all contractor arrangements involving an intermediary such as a personal service company (PSC)
- Decide who will be responsible for carrying out the assessments as well as the information and tools used to determine status
- Provide Status Determination Statements to contractors
- Put in place a dispute process for dealing with challenges to status determination
- Where a deemed employment situation exists and IR35 therefore applies, ensure that payroll arrangements from April 2020 are set up to make the appropriate deductions of income tax, NICs and the apprentice levy
- Where contractors are supplied via a recruitment agency or other third party in the supply chain, ensure the terms with the agency are fit for purpose (e.g. supply of information to enable status determination checks to be carried out, appropriate warranties and indemnities for inaccurate provision of information)
We expect the changes to be extended to all organisations within the next few years, and therefore whilst smaller organisations will not be subject to the same statutory obligations in April 2020, they should still keep any future changes on their resourcing radar.
The financial impact of the upcoming changes is already being felt by end users who are facing consultants’ demands for higher fees to offset the reduced payments. Where contractors are categorised as being in “deemed employment” for IR35 tax purposes, the logical next step will be for them to ask for employment rights and benefits. At this point many end users will start to question the value of the traditional contractor models.
If you have any further enquiries in relation to the upcoming changes to IR35, you can contact Rebecca Thornley-Gibson
, Partner in our DMH Stallard Employment team, by phone or by email