PRIVATE SECTOR OFF PAYROLL WORKING FOR INTERMEDIARIES (IR35)

PRIVATE SECTOR OFF PAYROLL WORKING FOR INTERMEDIARIES (IR35)

From 6 April 2020, medium and large-sized private sector clients will be responsible for deciding whether intermediaries working for them are caught under the ‘off payroll working’ IR35 rules. This includes some charities and third sector organisations. (If a worker provides services to a small client in the private sector, the worker’s intermediary will remain responsible for deciding the worker’s employment status and if the rules apply).

An intermediary will normally be a worker’s own personal service company, but could also be a partnership, a managed service company, or another person.

The rules make sure that workers, who would have been an employee if they were providing their services directly to the client, pay broadly the same tax and National Insurance contributions as employees.

Status Determination

If your intermediary provides services to a medium or large-sized private sector client, the worker should get an employment status determination from the client, as well as the reasons behind that determination, and will be able to dispute the determination given to them if they disagree with it.

If no employment status determination is received, this may be because you are providing services to a small client in the private sector.

If you do not receive a status determination from the client you, as the intermediary, should determine whether the off-payroll working rules apply. You can do this using the HMRC check employment status tool.

https://www.gov.uk/guidance/check-employment-status-for-tax

Disagree

If your worker disagrees with the determination, they will need to write to the client to give reasons why. This should include details of:

• the employment status determination they disagree with
• their reasons for disagreeing

Copies of any records about disagreements should be kept.

The client will have 45 days from the date of receiving the worker’s disagreement to respond. During that time the client should continue to apply the rules in line with their original determination.

If the employment status determination has not changed, the client will have to tell the worker.

If the employment status determination has changed, the client will have to tell the worker and the intermediary.

Payment

If the off-payroll working rules apply to the worker, the income received for your worker’s services will have had tax and National Insurance contributions deducted from them before being paid, i.e.) the amounts are treated as employment income. This means that no further tax will be deducted or applied when the money is paid from the intermediary to the worker.

You can do this by paying it as either:

• a salary through the payroll – but do not deduct tax or National Insurance contributions
• dividends – which do not need to be recorded on the worker’s Self-Assessment

Corporation Tax will also not be due on the income if working through a personal service company.

If you wish to discuss this any further, please call the office on 01785 254550