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Blog

Working off-payroll

Adrian Mooy - Thursday, November 28, 2019
 
From 6 April 2020, there is a change to the off-payroll (IR35) rules.

 

The new rules will affect you if you work via your own personal service company. Clients are likely to investigate the profile of the contractor workforce more closely than before.

 

Contracts caught by the rules - The change could impact you if you supply personal services to large and medium organisations in the private and voluntary sector. If the client is a ‘small’ business, the rules are unchanged. A ‘small’ company meets two of these criteria: its annual turnover is not more than £10.2 million: it has not more than £5.1 million on its balance sheet: it has 50 or fewer employees.

 

Who decides? - Under the new rules, responsibility for making the decision as to whether IR35 rules apply passes to the business you contract for. The key question is whether, if your services were provided directly to that business, you would then be regarded as an employee. If you or your client use CEST, HMRC’s online check employment status for tax tool, HMRC undertakes to stand by the results if information provided is accurate, and given in good faith. In future, your client will have to provide you with the reasons for its status decision in a ‘Status Determination Statement’.

 

Implications - Significant tax implications arise. If IR35 applies, the business or agency paying you will calculate a ‘deemed payment’ based on the fees charged by your PSC. Broadly, this means you are taxed like an employee, receiving payment after deduction of PAYE and employee National Insurance Contributions. If you operate via a PSC, the PSC will receive the net amount, which you can then receive without further payment of PAYE or NICs.

 

Review your position - are clients likely to query your employment status? Should you consider restructured work arrangements, or renegotiating fees? If working via a PSC, is it still the best business model?

 

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