From April 2020, new rules come into affect to bring the off-payroll regulations for large and medium size otganisations in line with the public sector.
The changes will only affect you if you have, or will have, individuals (e.g. contractors) working for you off-payroll through their own intermediary, usually a limited company, and often known as a Personal Service Company (PSC).
To qualify as a large or medium entity yo need satisfy 2 of the following criteria:
- an annual turnover of more than £10.2 million
- a balance sheet total of more than £5.1 million
- more than 50 employees
If you are not a company or LLP but have an annual turnover of over £10.2m, you will also be in scope.
From 6 April 2020, medium and large-sized organisations outside the public sector will be responsible for deciding the employment status of contractors for tax purposes. Currently, contractors themselves are responsible for making this decision in these sectors.
As a Contractor these changes may affect how you pay the tax and National Insurance contributions that are due.
If you are affected, the organisation you are providing your services to will determine your employment status for tax purposes from 6 April 2020. Your hirer will give you a ‘Status Determination Statement,’ which will set out the determination your hirer has made and the reasons behind this. You may be asked to provide the hirer with some information to help them make their determination.
If they determine that you are employed for tax purposes, they (or the agency they have hired you through) will pay the necessary tax and National Insurance before they pay you.
If they determine that you are self-employed for tax purposes, you will remain responsible for meeting your tax obligations.
Depending on your own personal circumstances the terms of your contract may change. It is also possible that you will pay additional income tax and NICs if you had not previously been applying the off-payroll rules (IR35) correctly. However, HMRC will not use information resulting from these changes to open a new enquiry into earlier years unless there is reason to suspect fraud or criminal behaviour.
HMRC has created the Check Employment Status for Tax (CEST) tool to help businesses make status determinations. The output that CEST generates is acceptable as your Status Determination Statement.
HMRC stands by the results given by the tool, provided the information entered is accurate and it is used in accordance with their guidance.
The CEST tool and guidance on how to complete it can be found at:
- www.gov.uk/guidance/check-employmen-tstatus-for-tax
- www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm11000
For guidance on tax, employment and self-employment please contact your local Burgis & Bullock office on 0345 177 5500