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Draft Finance Bill 2019/20: IR35, Private Sector Off Payroll Working – New Rules

Author

Ryan Conlon

Ryan qualified as a Chartered Tax Adviser with a Big Four firm before continuing his tax career at national firms and HMRC’s Fraud Investigation Service.

Draft Finance Bill 2019/20: New rules for off-payroll working in the private sector from April 2020

The Government published draft clauses to be included in the Finance Bill 2019/20, together with related consultations and response documents, on 11 July.

The key announcements include rules for off-payroll working in the private sector from April 2020. These extend the public sector rules introduced with effect from 6 April 2017 and following a consultation period that closed earlier in 2019.

New legislation will be introduced with effect from 6 April 2020 requiring businesses to operate PAYE and National Insurance Contributions where they engage with workers through limited companies and those workers would otherwise have been employees but for the interposing of the limited companies.

The proposed legislation largely mirrors the existing public sector legislation which took effect from April 2017.

Under the proposed rules:

• The party paying the worker’s personal service company will be treated as the employer for the purposes of income tax and Class 1 National Insurance Contributions.

• The amount paid to the personal service company will be deemed to be payment of employment income or earnings for Class 1 National Insurance Contributions.

• The party paying the personal service company will be liable for secondary Class 2 National Insurance contributions and obliged to deduct tax and National Insurance Contributions from payments they make to the personal service company in respect of services provided.

• The deemed employer will be required to remit payments to HMRC and send HMRC information about payments using Real Time Information (RTI).

If the worker is engaged through an agency, the obligation to operate PAYE and NIC would fall on the agency in the labour supply chain making the payment to the worker’s personal service company.

The legislation will include provisions to allow for the transfer of liability, and the transfer of information, through supply chains.

The measures will apply to engagements with medium or large-sized organisations. Small organisations outside the public sector will be exempt from operating the rules. Small organisations will be defined by reference to annual turnover, balance sheet value and the number of employees.

Next steps – April 2020 – New Rules

It is welcome that engagements with small organisations outside the public sector are exempt.

For others however the new rules will change significantly how businesses engage with off-payroll workers and such medium and large businesses that engage with individuals through personal service companies should review their position as a matter of urgency.

For more information on off payroll working or IR35 in the private sector, please contact a member of our helpful tax advice team. You can also read more about the Draft Finance Bill 2019/2020 below…

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