Off-payroll Working

From 6 April 2020, medium and large-sized organisations outside the public sector will be responsible for deciding the employment status of contractors for tax purposes. Currently, contractors themselves are responsible for making this decision in these sectors.

(A medium or large-sized organisation will have a turnover of more than £10.2million, a balance sheet total of £5.1m and/or more than 50 employees.)

 Plan ahead for changes to off-payroll working rules

From 6 April 2020, the off-payroll working rules as they currently apply where services are provided through an intermediary to a public sector body are to be extended to the private sector. From that date, private sector organisations which are medium-sized or large and which engage workers who provide their services through an intermediary, such as a personal service company, will need to carry out a status determination. If, ignoring the intermediary, the worker would be an employee of the organisation, the off-payroll working rules apply and the organisation (or fee-payer if different) must deduct tax and National Insurance from payments made to the worker’s personal service company. The organisation must also pay employer’s National Insurance. Where these rules apply, the worker’s intermediary will no longer need to work out the deemed payment under the IR35 rules – instead the worker will effectively be ‘on-payroll’.

The rules do not apply where the end client is a small private sector organisation. As now, the worker must determine whether IR35 applies and work out the deemed payment and pay tax and National Insurance if it does.

Speak to us to understand how the changes to the off-payroll working rules will affect you and what you need to do to prepare.