Further details have been released by the government in relation to the changes to off-payroll working rules (IR35). As previously announced the responsibility for determining whether individuals should be taxed as employees under the off-payroll working rules will move to the organisation receiving the individual’s services from 6 April 2020.
This change impacts upon medium and large sized clients. Such clients include those businesses with an annual turnover of £10.2 million (the simplified test) or, if companies or limited liability partnerships, you meet two out of the three factors below:-
- an annual turnover of £10.2 million;
- a balance sheet total of more than £5.1 million; or
- more than 50 employees.
If neither test is satisfied you will be classed as a small company/employer and the new rules may not affect you. Be aware that if you are a small company but are part of a larger connected or associated company group, if the parent of the group is medium or large, then subsidiaries will need to apply the off-payroll working rules.
Also, if a business grows then the changes may apply going forward. They will apply either from the start of the tax year following the end of the calendar year for the simplified test or if the multifactorial conditions apply and you meet the criteria for two years then the rules will apply in the tax year following the filing of the accounts for the second financial tax year.
If you are caught by the new rules our advice is to start the analysis of whether individuals should be taxed as employees sooner rather than later. You need to inform workers and agencies of your determination on their status from 6 April 2020 regardless of the outcome of the determination. If you fail to take reasonable care in making the determination this could result in the worker’s tax and National Insurance becoming your responsibility.
If you feel you are likely to be affected by the change guidance is available on gov.uk on how to prepare for the change of rules and we can assist with the analysis of the status of workers under IR35.