Beginning in April 2020, changes are coming for off-payroll working rules (IR35) from HMRC. Businesses currently utilising personal service companies, agencies, and other intermediaries will need to identify the employment status for all workers who are providing services through personal companies. Contractors, agencies, and other individuals could potentially be affected by new off-payroll rules, so it is important now to prepare for the changes.
The new off-payroll rules were designed by HMRC to ensure individuals providing the same types of services are paying equivalent taxes whether they are contractors or employees of an organisation. There are many factors to consider to identify off-payroll workers:
Intermediary Off-Payroll Workers
If your company is using a personal service company to hire a worker, but that worker would be otherwise considered an employee, that would be an off-payroll worker
If a worker is being paid through a personal service company or an intermediary, they make different income and national insurance contributions than a regular employee
If an individual working would be an employee if they directly provided services to your organisation, they will now pay approximately the same tax and NIC as your employees
Public Authority Off-Payroll Workers
HMRC has also defined the following organisations as a public authority:
Government departments and executive agencies
Some companies owned or controlled by the public sector
Schools and Universities
The National Health Service (NHS)
If a worker is providing services to these public authorities through their own company or intermediary, the off-payroll rules would apply to those workers. This also includes UK Parliament, the National Assembly for Wales Commission, and the Northern Ireland Assembly Commission.
A worker can also be classified as self-employed by HMRC. They are not paid through PAYE, so it is important to classify workers as self-employed or as a contractor to ensure your organisation is covering the appropriate tax and employment law regulations. HMRC has several options to check employment status on their website to ensure your classifications are correct.
If you have workers who are not classified as employees of your organisation, prepare now for the upcoming changes to off-payroll rules. Payescape can help you get your off-payroll workers in compliance with new HMRC regulations. Our easy-to-use technology, customised reporting, and CIPP-certified staff help you maintain payroll compliance and our technology automatically updates with any new regulations each year. To learn more about our simplified payroll and compliance, click here
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