Finance Bill 2019-20 confirms start date for private sector off-payroll
11 July 2019
The Government has published 2019-20 Finance Bill draft legislation and measures which confirm that the reforms to off-payroll working in the private sector for medium and large businesses will come into effect from April 2020, as previously announced.
The reform will make organisations responsible for determining whether the existing rules apply to the contractors they hire and ensuring the necessary employment taxes are paid.
This measure will have effect for contracts entered into, or payments made, on or after 6 April 2020.
As announced at Budget 2018, outside the public sector, this change will only apply to medium and large-sized organisations. The draft legislation makes clear when non-public sector organisations, including unincorporated organisations, will be considered to be small and therefore not within the scope of the reform.
The draft legislation also includes provisions to ensure that all parties in the labour supply chain are aware of the organisation’s decision and the reasons for that decision, and will introduce a statutory, client-led status disagreement process to allow individuals and fee-payers to challenge the organisation’s determinations.
Legislation has been introduced in the Finance Bill 2019 to amend ITEPA 2003 and relevant National Insurance contributions regulations, so that where an individual works for medium or large-sized engagers outside of the public sector, through their own PSC and falls within the rules, then:
The party paying the worker’s PSC (the ‘fee-payer’) is treated as an employer for the purposes of Income Tax and Class 1 National Insurance contributions
The amount paid to the worker’s intermediary for the worker’s services is deemed to be a payment of employment income, or of earnings for Class 1 National Insurance contributions for that worker
The party paying the worker’s intermediary (the ‘fee-payer’) is liable for secondary Class 1 National Insurance contributions and must deduct tax and National Insurance contributions from the payments they make to the worker’s intermediary in respect of the services of the worker
The person deemed to be the employer for tax purposes is obliged to remit payments to HMRC and to send HMRC information about the payments using Real Time Information (RTI)
HMRC consulted on the detail of the reform between 5 March and 28 May 2019 and in April 2019 published guidance on the actions engagers can take to prepare for the reform. The guidance on how to prepare still applies:
- Look at your current workforce (including those engaged through agencies and other intermediaries) to identify those individuals who are supplying their services through PSCs
- Determine if the off-payroll rules apply for any contracts that will extend beyond April 2020. The HMRC Check Employment Status for Tax service can be used to do this
- Start talking to contractors about whether the off-payroll rules will apply to their role
- Put processes in place to determine if the off-payroll rules apply to future engagements which might include considering who within the organisation should make a determination and how payments will be made to contractors who are considered to fall within the off-payroll rules
The Government is seeking feedback from experts and stakeholders on the draft legislation.
HMRC will also begin rollout of its education and support package over the summer.
- CIPP half-day training course on Employment status and modern employment practices
- CIPP webcast on off-payroll working in the private sector from April 2020
- More detailed IR35 guidance can be found in the Business Tax section of GOV.UK.
- HM Treasury updated Factsheet