Employment Taxes

Off-payroll working in the private sector

Measures are to be introduced to extend reforms of IR35 to private sector businesses from April 2020. Similar changes were introduced in the public sector in 2017 which HMRC claims to have raised £550 million of income tax and national insurance in its first year.

This measure is aimed at individuals who provide their services via a company rather than as an individual via PAYE. HMRC state that their aim is to ensure that “two individuals working in the same way broadly should pay the same income tax and national insurance, even if one works through a company”. This is a laudable aim but the reality is that businesses will need help to interpret incredibly complex legislation.

The policy of charging additional tax and national insurance to individuals who provide their services via a personal services company was first introduced in 2000 and is known as “IR35”. Reforms were introduced in April 2017 which has resulted in those working  for public sector organisations such as the BBC and the NHS paying more tax and national insurance on their income.

HMRC has developed the Check Employment Status for Tax (CEST) tool to help businesses determine whether the new rules apply to a particular contractor or engagement. However, this is still a subjective area and it is not always easy to identify whether a business is caught by these rules.

HMRC has announced that these measures will not apply to the smallest 1.5 million businesses, but precise limits and thresholds have not been announced.