Private Sector Off Payroll Workers

Off payroll working rules were introduced a couple of years ago with regards the public sector. For off payroll workers you should think contractors/freelancers/IR35. The long awaited ” private sector IR35 ” legislation has now been released in draft form. This new legislation is expected to come into force from April 2020.

The new proposals will apply to private sector engagements where the ” end client ” is a medium or large business, as defined by the Companies Act. The end client is the person/organisation that receives the services of the personal service company ( PSC ) worker, at the end of the supply chain.

The end client now becomes the decision maker as to whether IR35 applies to the engagement or not. They must produce a Status Determination Statement ( SDS ), which provides a conclusion as to whether IR35 applies to the engagement, and the reasoning behind this conclusion. The SDS is then given to the PSC worker, and also the party directly below it in the supply chain. The SDS can then be further passed down the supply chain.

Whichever party is ultimately left ultimately holding the SDS will take responsibility as the ” fee payer ” which is essentially the party responsible for ensuring the correct tax treatment is applied to the PSC. The fee payer would typically be the party closest to the PSC in the supply chain ( i.e the party physically paying the PSC ).

This is complicated legislation, and it still appears to have many unanswered questions that could come out of it. The government has committed to providing further guidance during 2019, and has also accepted that HMRC’s check employment status indicator tool ( CEST ) is woefully inadequate at providing an accurate decision.

As further updates become available, we will post this information on our website, but all contractors/freelancers can expect a shift in attitudes as to their status from next April, as was seen in the public sector previously. This would then increase their tax burdens, and effectively reduce their take home pay!!!!!


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