EMPLOYMENT STATUS - 30.03.2020

Off-payroll working - the operational rules

IR35/off-payroll working has seldom been out of the news for several months and many businesses are confused by the situation. HMRC has published numerous changes to the off-payroll rules that come into effect in April. What’s to know?

Current state of play

On 27 February 2020 the Treasury published the outcome of the four-week IR35 review. Alongside it, HMRC has published a comprehensive list of guidance that has been provided to both engagers and off-payroll workers (see Follow up ). Engagers should be aware though that the most comprehensive and detailed guidance for them is contained in the employment status manual, see Follow up .

Pro advice. The guidance mentions how to handle benefits in kind, but no benefits in kind should be provided to off payroll workers!

Starter checklist

One of the additions to the employment status manual is the instruction that engagers should use a starter checklist to set up deemed employees on the payroll.

Pro advice. As the current starter checklist for actual employees is inappropriate, and an official deemed employee starter checklist isn’t to be provided, we have created a starter checklist that you can use (see Follow up ).

Correct code? HMRC has now instructed engagers that if an off-payroll worker completes a starter checklist they should be allocated tax code BR and starter declaration C. If they do not complete the starter checklist in time for the first payroll run they should be allocated starter declaration C and tax code 0T/1.

Pro advice. As deemed employees are unlikely to be 20% taxpayers at the end of the year it may be preferable always to allocate tax code 0T/1 as this is more likely to take the correct amount of tax. The allocation of BR will lead to an underpayment at the end of the year.

Payment dates

In early February 2020, HMRC announced that only payment for work completed after 6 April 2020 should be considered under the IR35 rules. This was a relief to engagers. Until that point HMRC had insisted that work that was complete on a contract by 5  April 2020 still needed to be considered under IR35 if the invoice was paid from 6 April 2020 onwards.

International issues

It has now been confirmed that if an engager is based overseas and has no permanent establishment in the UK, any work done by an off-payroll worker based in the UK does not need to be considered by the overseas engager. It will remain the responsibility of the off-payroll worker to consider their status.

How big am I?

One of the major concerns for consultants has been establishing if their engager is small so is outside the scope of the rules. HMRC has now confirmed that it is a requirement for a small engager to confirm their size to a consultant, as it remains the consultant’s responsibility in such cases to determine their status.

Soft landing?

It appears that there will be no penalties until April 2021 for inaccurate RTI returns which could have been levied if a deemed employee was not reported. It is unlikely to apply to the much more serious “transfer of liability” (where the engager picks up the consultant’s tax and NI as well as their own liabilities) when there has been a serious compliance failure, either at the engager or within their supply chain.

Review of off-payroll rules in the private sector

Employment status manual

Deemed employee starter checklist

HMRC has now instructed engagers that if an off-payroll worker completes a starter checklist they should be allocated tax code BR and starter declaration C. We’ve created a brand new starter checklist for you.

© Indicator - FL Memo Ltd

Tel.: (01233) 653500 • Fax: (01233) 647100

subscriptions@indicator-flm.co.ukwww.indicator-flm.co.uk

Calgarth House, 39-41 Bank Street, Ashford, Kent TN23 1DQ

VAT GB 726 598 394 • Registered in England • Company Registration No. 3599719