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Countdown to off-payroll rules change

The extension of the public sector off-payroll working rules (known as IR35) to the private sector is set to go ahead in April 2020, despite the postponement of the Budget and a call from the Federation of Small Businesses (FSB) for the change to be delayed.

However, in January the government launched a review of the changes to address concerns from businesses and individuals about how they will be implemented. The review will determine if any further steps can be taken to ensure the smooth and successful implementation of the reforms.

The rules apply where a worker provides services through an intermediary – usually their own personal service company. Such workers would have been taxed as employees if they had worked directly for the end user of the services.

Where the end user is a public sector organisation, that organisation is responsible for determining the worker’s employment status. From 6 April 2020, medium and large private sector and third sector organisations will also have to determine employment status of contract workers.

If the worker is deemed an employee, the end user must pass the employment status determination to the organisation that pays the intermediary, which must then include the worker in their report to HMRC for tax and national insurance contributions (NICs.) Any decisions can be challenged by the intermediary or worker.

Determining employment status can be difficult. HMRC offers a ‘check employment status for tax’ (CEST) tool designed to enable workers and hiring organisations to decide whether an engagement is an employment for tax purposes.

Several cases have ended up in the Tax Tribunal, most recently that against Helen Fospero, a TV presenter who used a company to work for a range of clients. Although she was required to perform the services personally and ITV retained editorial control, other factors pointed towards self-employment and HMRC lost the case.

If you think you may be affected by the changing rules, get in touch.