Off Payroll Working

By August 29, 2019Uncategorized

Off Payroll Working

As a payroll bureau we generally deal with conventional PAYE employees, however the rules are due to be changing for off payroll working in April 2020 and we thought we should highlight a few items here.  These are changes that affect companies employing contractors.

Who do the new rules apply to?

The new rules will apply to medium and large companies, with smaller companies excluded.

To qualify as a small company the proposal is that two of the following requirements must be met:

  1. Annual turnover Not more than £10.2 million
  2. Balance Sheet Total Not more than £5.1 million
  3. Number of Employees Not more than 50

(see consultation document)

What are the changes?

The change is that the business or agency becomes responsible for the contractor paying the correct amount of tax and National Insurance.  The government says they have brought these measures in to try and increase fairness in the tax system, so that individuals will pay roughly the same tax doing roughly the same job.

The governments CEST tool (Check Employment Status for Tax) is to be enhanced, and further guidance is also going to be made available.  Businesses will need to look at this before April, as it is not straightforward, and if changes are required they will require some preparation.

The first step is to consider whether the new rules apply from April, so is the business a small company or not, and then whether there are any workers who are not employees.  The business then needs to determine if these workers should have the off-payroll rules applied to their roles or not.

The proposed change to off payroll working was announced in the 2018 Budget, and those companies aware of IR35 should already be preparing.  At the moment the legislation is still being drafted, but we imagine it is very unlikely it won’t go through.

For further information on the off payroll working changes please see here.

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