What the delay to off-payroll working rules means for organisations and contractors

07 April 2020

HMRC has published a blog which provides some essential information that organisations need to be aware of, due to the delay to the off-payroll working reforms that were due to come into force from 6 April 2020. They are now being deferred until 6 April 2021 in response to the outbreak of coronavirus.

The government has continually confirmed, since this announcement, that the reforms are simply being delayed and are not being cancelled, and that the delay is intended to assist businesses and individuals in dealing with the economic impacts of COVID-19.

Until 6 April 2021, any contractors who work through their own limited company, and within non-public sector organisations will still be required to operate current off-payroll working rules. There will be no need for the organisations engaging them in the private and third sectors to establish whether or not IR35 rules apply, in tax year 2020-21. This, in turn, means that the responsibility for producing and issuing status determination statements is also removed. The fee payer will not be required to process the contractor’s pay through payroll and will not need to deduct tax and National Insurance (NI) contributions. Similarly, there will be no requirement to pay employer NI contributions or to pay the Apprenticeship Levy on these payments.

Contractors will continue to have their invoices paid prior to tax and NI deductions by clients and agencies, and payroll only needs to be operated for anyone who no longer provides services for an organisation through their own limited company but are not employed directly.

Within the RTI Data Items from April 2020, it confirms that from 6 April 2020, there will be an ‘off-payroll worker subject to the rules’ indicator within PAYE RTI. Any organisations in the private and third sector should refrain from using this indicator and should not process pay for contractors using their own limited company through payroll software. This flag should only be utilised where services are provided to public authorities and fall inside of the IR35 rules.

Off-payroll working rules were introduced in the public sector in April 2017 and should continue to be operated in the same way as they have for the past three tax years. However, additional requirements were planned for public authorities, which were due to be actioned for tax year 2020-21, but public authorities do not need to do the following, until 6 April 2021:

  • Produce a status determination status and pass it to the worker and first party in the contractual chain
  • Have a status disagreement in place

Public authorities, or agencies, for contracts subject to the off-payroll working rules will, however, be required to use the ‘off-payroll worker subject to the rules’ indicator on payroll software. It will be the duty of the fee payer to ensure that this is actioned. This is not mandatory until 11 May 2020 but the option will be available from 6 April 2020.

 


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