IR35 event

New IR35 ‘Off Payroll’ Working Rules and HMRC Responsibilities Expected to Cause Contract Changes

From April 2020 medium and large businesses will be responsible for determining whether ‘workers’ should be officially registered as ‘employees’ and, as a result, potentially lead to a change in many workers’ contracts, as legislation known as ‘IR35’ officially comes into force impacting thousands of businesses and individuals.

IR35 legislation was originally introduced in 2000 to ensure those individuals hired by a business, who would ordinarily be deemed ‘employees’ - if they had been engaged directly - broadly paid the same amount of tax and National Insurance as employees. 

Businesses for many years have been obliged to undertake the ‘self-employment v employed’ test but IR35 obligations previously fell upon the individual (worker) who provided their services through an intermediary (e.g. through another a company) to another person or entity. 

Unfortunately, HMRC do not believe the rules have been followed, resulting in lost income to the Treasury and unfairness, and from April 2017 new legislation was introduced that meant the public sector engaging with a worker became responsible for determining the status of the worker, and now, from April 2020, this same rule will apply to medium and large private businesses too.

For those businesses who fall into the medium/large category i.e. meet two or more of the following: £10.2 million+ turnover, £5.1 million+ balance sheet, 50+ employees, this will mean undertaking a very close assessment of  those working on behalf of the business and vice versa. There are added complications too in the way the financial year and calendar year figures are calculated.

Commenting on the change in legislation, Karen Thomson, Head of Armstrong Watson Payroll said,

“Whilst the criteria for IR35 hasn’t changed, who the obligation falls upon to assess and report it has.

“It is vital that those who work through an intermediary - such as their own personal service company (PSC), agencies, accountants and agents who engage the services of a worker, HR managers and of course anyone involved in payroll - are aware of these changes, as soon it will be the responsibility of an employer or engager to assess a worker’s status.”

To help guide you through this new legislation, Armstrong Watson LLP and the Association of Cost Engineers are hosting a free breakfast event on Tuesday 19th November at Energus, West Cumbria where tax, legal and payroll experts will discuss these new rules. If you would like to attend please register by emailing your details to: events@armstrongwatson.co.uk

Dominic Doig, Chairman of the North West branch of the Association of Cost Engineers added,

“Anticipation of this change in legislation is already causing confusion and concern in the construction and engineering sectors, where projects are heavily reliant on agency workers.  Both large and small clients, as well as supply chain consultants and contractors need to fully understand their obligations and mitigation options. The opportunity to discuss this critical change with payroll experts conversant with both HMRC reporting compliance and employment legislation should not to be missed!”

For more information about IR35 and how this may impact your business, contact Karen Thomson on 07825 561028 or email at karen.thomson@armstrongwatson.co.uk

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