Off payroll working – where does the responsibility lie?

Jen Kinnear | 05 September 2019

Off payroll working – where does the responsibility lie?

The Off-Payroll working rules published last week will significantly impact contractors and hirers reliant on contingent labour.

From April 2020, the responsibility will shift to the employer for medium and large companies in the private and third sectors to determine whether the contractors they hire fall within the scope of the revised legislation and are liable to pay PAYE and NIC on the same basis as permanent company employees.

The changes will affect individuals supplying their services through a personal service company (PSC) or other intermediary vehicle as well as medium and large organisations that engage with individuals through PSCs. Recruitment agencies and other intermediaries supplying staff through PSCs will also be affected by the reforms.

The reforms are not introducing a new tax. They are being introduced to bring the private sector in line with the public sector, which has been following similar legislation since 2017. The introduction of this legislation for the public sector has already raised a significant amount for the Treasury.

Many criticisms have been made surrounding the new legislation as it has been said that the reforms will increase the cost of working with contractors by up to 14.3% due to the employment taxes which will apply.

This may seriously disrupt the private sector and the way that it currently works, forcing businesses to carefully consider their staffing requirements and how they engage their workers.

Whilst HMRC have provided a ‘Check Employment Status for Tax’ (CEST) tool to enable employers and contractors to determine whether the new rules are likely to apply, there are many cracks in the questions asked, meaning that often a wrong conclusion is provided.

If these Off-Payroll working rules are likely to affect you, be it as a contractor or as the hiring party, please do not hesitate to contact us for further professional advice.

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