what is off-payroll working?
Firstly, it is important to understand what is means to be considered as “off-payroll working”. This applies to workers that are operating via their own personal service companies while providing services to their clients. A report showed that during the year 2019, there were almost 5 million self-employed workers in the UK many of which are contractors. HMRC believes that often these contractors are really employees of the hirer hiding behind the status of “self-employed”.
Currently it is the responsibility of the worker to determine their own employment status by assessing their contract and working practises against what is known as the IR35 intermediaries legislation. An ‘outside IR35’ decision means the contractor pays significantly less tax. HMRC believe the workers often do not do the assessments correctly. HMRC think that nine out of ten times, the ‘outside IR35’ decisions are incorrect.
To avoid this, the government is shifting the responsibility to the hirers. This means that the hirers will be responsible for determining their employment status. This shift of responsibility also shifts the risk to you as hirers. If you somehow get the assessments wrong or decide to go for blanket assessments, you may be held accountable for the amount owed by these personal service companies. Therefore, reasonable care should be given while carrying out assessments to make sure that the results are 100% accurate.
what is changing and when?
The IR35 off-payroll working legislation was originally going to be implemented in April 2020, but due to the pandemic, it got pushed to April 2021. The government has passed the legislation and it is all set to come into the private sector in April 2021 as planned.
Hirers like you also need to have a clear understanding of what it means and how the rules apply. At giant, we provide tailored services and full assistance to help you understand everything about the off-payroll working legislation and what it means for your workers to be inside or outside IR35 including providing engagement solutions for your workers so future payments to them are compliant with the legislation.
If an assignment is inside IR35, it means that your contractors are liable to pay taxes, national insurance, and apprenticeship levy. However, if an assignment is outside IR35, it implies that the contractor can continue to pay themselves how they choose which is normally via dividends.
who do the changes affect?
Now you may be thinking who the rules apply to, and how do you know if the contractors you engage need to get assessed.
According to HMRC, the off-payroll working legislation does not affect small companies. To be smart and efficient in its decision, HMRC set the following criteria for a company to qualify as a “small company”:
• balance sheet total less than or equal to £5.1 million, or
• annual turnover less than or equal to £10.2 million, or
• less than or equal to 50 employees
what is the impact of these changes?
To stay compliant , it is essential that the assessments are carried out in a professional manner taking working practices into consideration according to their significance. Working practices are ultimately the criteria that determine the engagement type. These include mutuality of obligation, control, substitution, worker’s equipment, etc. giant IR35
To assist you better, at giant, we have the assessment service as well as fee-payer service. You can completely rely on us for compliance and support. We will take care of everything for you. From determining the employment status of your contractors, to reviewing their working practices on an individual basis, then to finally becoming their fee-payer, we have got it all covered at giant.
The benefit of availing this service for your contractors is that they’ll know their employment status based on each assignment. It will eradicate the dilemma of getting caught by HMRC, and your contractors will also get to keep their limited companies. Moreover, the service of reassessment is also available for contractors after a certain time period as an added benefit. You as hirers will be having a smooth and efficient transition through giant IR35 fee payer.
Off-payroll working’s implementation in the private sector will be a game changer for a lot of companies.