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Off-Payroll Working
Comes in April 2020

The Off-Payroll Working rules are to be extended to the private sector from April 2020 - so what does this mean?

Key Points of Note

The key points of note are:

  • The start date is confirmed as 6th April 2020 with any payments made after this date, regardless of when the work was carried out, subject to the new rules.
  • The existing IR35 rules will form the basis for the assessment.
  • As anticipated there are proposed changes to the liability structure.
  • Any amendments made in the implementation for the private sector will also apply to the public sector.
  • A right for workers to obtain reasons behind decisions of status.
  • Small company exemption confirmed as one where the turnover at the start of the accounting period turnover was less than £10.2m, the balance sheet has less than £5.1m and there are less than 50 employees.

So what does all this mean?

1. Whilst the start date is 6th April this is will affect work carried out by monthly paid workers in March and therefore all contractual changes will need to be in place by the end of February.

Professional Passport comment:

End clinets need to start work asap with their recruitment partners on this to be fully prepared to meet the deadlines. Any new assignments issued with an end date after the implementation need to be considered carefully - so where contract lengths of 12 months are issued the new regime is likely to already apply to the final payments made on these contracts.

 

2. We have been predicting that there would be changes to the liability structure based on the experiences of the public sector. It would appear this is the case. The Fee-Payer, the entity paying the PSC will, in most cases, still hold any unpaid tax liabilities. However even where the end client has acted correctly and it is the supply chain partners that create a failing the liability can be passed back up the supply chain to the recruitment company holding the contract with the client. Where a recovery from this company failed then the liability could be passed back up to the end client.

Professional Passport comment:

This places significant pressure on end clients and recruitment companies to ensure the supply chain operates correctly.

As we are already seeing many end clients, MSP’s, RPO’s and Framework Agreements are likely to amend their contracts to require any workers supplied under these arrangements operate through an independently accredited provider, Professional Passport accreditation is already being widely recognised and accepted in these cases.

End clients and their recruitment partners will need to ensure they work closely together and understand the assessments and outcomes to ensure these have been carried out correctly; as the ‘reasonable care’ get out seems to be coming to an end. As a result making an ‘outside’ determination must be correct and accurate to avoid liabilities. This will also support situations here contractors seek to understand the reason behind their status and avoid the threat of ‘blanket’ determinations.

 

3. There is now a requirement for the determination, and the reasons behind this, to be sent to all parties in the supply chain; this includes the worker. This needs to be considered and reflect the actual working arrangements to meet the requirements in the legislation. Blanket assessments could result in 'fee payers' making their own determinations and, if HMRC successfully challenged these, the liability passing back to the end client.

Professional Passport comment:

Accurate assignment status assessment is critical in protecting parties from liabilities. As the requirements now include providing the reasons behind the determination any variation between stated arrangements and actual arrangements are likely to be challenged by the workers. The appeal process is client led so this will result in significant additional workloads for clients if an accurate assessment is not carried out from outset. It also opens up the possiblities of liabilities coming back up the supply chain.

With the initial volume and ongoing management requirements we do not believe a manual process would work efficently across medium to large sized operations. Furthermore ensuring the ongoing quality and accuracy of the assessments becomes a challenge. A manual process should only be used for a very small percentage of assignments and typically those that are very specialised.

We are recommending IR35 Shiled for the 'bulk' assessments as their process and support tools are, in our opinion, unsurpassed in the market.

 

 

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