Off-payroll working in the private sector

Off-payroll working in the private sector

Matthew Lawford, director at AJ Chambers Recruitment, asks employment tax specialist, Alistair Kendrick, for his views on the off-payroll working consultation in the private sector

HMRC has now published the consultation document on the proposals currently impacting those who work off-payroll in the private sector. These proposals follow the changes introduced for the public sector from April 2017.

The consultation document was issued on 5 March 2019, and the period of consultation ends on 28 May 2019.

Most importantly, it proposes some changes to the arrangements in place in the public sector; the proposal states that any changes introduced from this review will be mirrored in the public sector, as well.

It is proposed that the changes decided upon will be introduced in April 2020.

Those who engage workers and are considered a ‘small business’ will not be required to implement the proposed rules. A ‘small business’, in this case, is defined by the Companies Act definition:

  1. Annual turnover: less than £10.2m.
  2. Balance sheet total: less than £5.1m.
  3. Number of employees: less than 50.

It is clear that these proposed changes will create significant amounts of additional work—particularly for the end client.

Furthermore, it is concerning that this additional burden is to be their responsibility, rather than the responsibility of the agencies or HMRC employees themselves.

Under these guidelines, the client will not only have to determine whether – based on the terms of the engagement – they would be caught by IR35, but they would be required to share this with the contractor and other parties within the supply chain. In addition, they would be expected to set out the reasons for that particular decision.

To help those making the decision, the CEST tool is taking on comments made to HMRC by those who currently use this tool. It will be interesting to see how the revised CEST tool will look, and whether it does address the criticisms we have seen of it to date.

Nonetheless, the impact of these proposed changes on clients, through the possible statutory requirement to issue an explanation of the decision made to the supply chain, is going to see a repeat of some of the disputes we saw in the public sector in April 2017; the decisions of the end client were not considered accurate by the agency, and this led to debates over who was right.

Surely it would be safer if those disputes could be addressed by HMRC? Currently, they seem to have opted out of the process.

It is clear that those who engage workers subjected to these changes need to think about how they will deal with the determination process.

They will need to, not only understand what the terms of the contract will be, but have a comprehensive knowledge of how it works in practice. The individual will also need to consider how they deal with any disputes that may arise.

It is possible that some may consider this hard work and, from April 2020, no longer entertain these types of arrangements.

Employers who have concerns about the likely additional workload need to make their views known to HMRC in the consultation process.

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