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Changes for businesses with off-payroll workers & consultants

If you use off-payroll workers or consultants and are in the private sector, you need to read this!

Last year the government announced changes to the so-called IR35 rules – a piece of tax law put in place to tackle income tax and National Insurance avoidance by engaging workers off-payroll and paying them for work via a limited company.

Draft legislation is expected to be finalised soon with changes coming into force from April 2020.

The government rolled out similar changes in the public sector in April 2017.

 

When may IR35 apply?

If your business is using contractors or off-payroll workers and pay the individual’s company (often referred to as a “personal service company”) for the work they’ve done.

From April 2020, you will be responsible for paying income tax and National Insurance contributions, and/or face a penalty if HMRC considers the arrangement between the off-payroll workers and your business to be an employment relationship and not a genuine self-employed/contractor relationship.

Here are some of the things you need to be thinking about right now:

  • Are your off-payroll workers essentially employees in all but name (whether you pay their company or not)?
  • When was the status of your off-payroll workers last reviewed?
  • What were your reasons for engaging off-payroll workers? Do they still apply?
  • Are your current arrangements for off-payroll workers still appropriate?

 

What size is your business?

Good news for ‘small businesses’ – you don’t have to worry. This new rule does not apply to you as long as you can satisfy 2 of the following:

  • Turnover less than £10.2m
  • Not more than £5.1m on its balance sheet
  • Fewer than 50 employees

 

We’re not a small business – What’s the risk if we do nothing?

Significant.

Aside from negative PR issues, HMRC has the power to issue substantial fines and penalties for non-compliance with the regulations – so you really don’t want to be caught out.

 

We’re here to help

If your business falls outside of the small category and you would like to discuss this in more detail, please contact James Symons on 0115 9 100 250, or click here to send him an email.

Posted on August 20, 2019

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