Off Payroll Working from April 2020

Off payroll working from April 2020

• Government publishes draft legislation for off payroll working from 6th April 2020
• Government estimates that new rules are likely to impact 170,000 individuals working through their own personal service company (“PSC”) who would be employed if engaged directly
• The draft provisions for the Finance Bill 2019-20 are an amendment as opposed to a rewrite of the existing Chapter 10 legislation which was applied to the public sector in April 2017
• The draft provisions will apply to medium or large sized organisations in the private sector
• Small private companies will be exempt from the new rules and the current provisions of Chapter 8 ITEPA will apply
• The exclusion of small companies is applied through definition of the Small Companies Regime detailed in the Companies Act 2006
• Criteria for qualifying as a “small” company are set out in sections 60A to G of the draft legislation
• Client obliged to issue a status determination statement to the worker which raises the question of how that action will be undertaken when they have no contractual link to the worker
• The worker and the deemed employer (i.e. the entity directly above the PSC in the chain) both have a right to request a review the client’s decisions

Aspire Comment

Part 2 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) will be amended to align the tax treatment between public sector clients and medium and large organisations in the private sector for payments made for workers’ services when they are being provided through their own personal service company (“PSC”).

The draft legislation is out for consultation till 5 September 2019. It is unlikely that the consultation period will result in many changes and so, where organisations engage PSCs, they need to establish which of their clients are excluded under the small exemption clause.

There will be a huge communication piece to be done with medium and large organisations to explain the process for issuing their status determination statement which notably must include the reasoning behind their decision. It seems unrealistic to oblige the client to pass the status determination statement to the fee-payer entity or the worker directly as there would normally be no contractual arrangement with those parties.  As such, we would assume that the statement will need to pass down the supply chain but the client will remain responsible for its issue and content. 

The Government also published a summary of responses in relation to the consultation on this subject which ran between 5 March and 28 May 2019. 

See our previous news here;

Aspire at the HMRC ‘Off-payroll working rules form April 2020’ roundtable event

Government Issues Information on Preparing for Off Payroll Working in the Private Sector