With the impending implementation of the new IR35 rules on 6th April 2020, it is vital that all end-user organisations are fully prepared for the changes to ensure that they do not incur a tax liability.
The new rules affect payments made to workers who provide their services through a Personal Service Company (PSC) and from April 6th medium and large businesses decide if the worker will be treated like a directly employed employee, even though the services are being supplied via the workers business.
Therefore tax and NICs must be deducted and paid on payments made after 5 April 2020 by the business that pays the PSC.
How do you prepare for this if you employ workers via their PSCs? Here is our 9 point plan:
- Decide if the size of your business means you will have to apply the new rules or are you in the public sector.
- If so, organise a project team to identify where your business spends money on outsourced project work, consultancy or short term engagements and on agencies.
- Work out how many status determinations need to be done. You do not need to issue status determinations for contracts before 6 April 2020 or for outsourced services. Ask an appropriate person to carry out the status determination (use the CEST tool). This should be someone who understands what the contractual arrangements are; who will be providing the services; the actual circumstances of the contract and how the services are provided.
- Give the worker, and PSC or agency, whichever is applicable he status determination (SDS) before the start of the contract or by 5 April 2020 for existing contracts. Include a statement on the SDS to say that the decision is only for tax and NICs, and does not confer employment rights on the worker.
- Establish an appeals process and include details of this on the SDS
- Consider the costings of the work. IF a contract is within IR35 employer’s NIC s are due at 13.8% on the net value.
- If you are a fee payer as well, let your payroll know there will be IR35 payments to process.
- Review contracts with agencies and consider inserting and indemnification clause to protect the business If the fee payer wherever it is in the chain fails to pay over the tax and NICs due to HMRC.
It is vital that hiring organisations are fully prepared for these changes and need to work closely with their agencies to ensure that all parties are fully engaged and comply with the changes for the 6 April 2020.
If you would like to discuss these changes and how recruitment agencies can support you in hiring PSCs, or transferring workers to a PAYE system contact Liam O Connell of the CK Group.
Author: Liam O’Connell