08/11/2019 by Pete Bird
Newsletter November 2019
Off-payroll (IR35) rules go private from April 2020
In October’s Budget, the Chancellor confirmed that from April 2020 the Government will extend to the private sector the same changes to the off-payroll rules which were introduced for the public sector from April 2017. The new rules will affect businesses in the private sector which engage individuals who work through their own company – often called a personal service company or PSC. From April 2020, the responsibility for determining the tax status of such an individual will shift from the individual’s PSC to the engager.
The rules will only apply to engagers who are medium or large – small businesses will be exempt from the changes. The precise definition of small has yet to be determined, but the Government says that they intend to use a definition similar to that in the Companies Act 2006. Under that Act, a company is defined as small if it meets two out of three of the following criteria:
• Turnover does not exceed £10.2 million
• Balance sheet total does not exceed £5.1 million
• Not more than 50 employees.
This definition will need extending so that it applies to engagers who are not set up as a limited company, such as a sole trader. The crucial point to appreciate is that the size test applies to the engager - the business taking on the worker - and not the worker’s PSC. The Government expects that 95% of businesses will meet the definition of small and not have to apply the new measures. Where the engager is within the definition of small, the responsibility for determining the worker’s tax status under the off-payroll rules will remain with the worker and their PSC.
Many workers may be nervous that if the engager determines that they should be subject to PAYE from April 2020, this could prompt HMRC to look back at the tax treatment that the worker and their PSC have adopted in previous years.
We understand HMRC will not be focusing on historical cases or carrying out targeted campaigns as a result of a worker becoming subject to employment taxes for the first time from April 2020.
DATES TO REMEMBER:
1 November 2019 - Due date for Corporation tax for companies with an accounting period ended 31 January 2019.
7 November 2019 - Due date for filing and payment of VAT for the period ended 30 September 2019, unless you submit a paper return then the date is 31 October 2019.
19th of the Month:
Due date for postal payments of PAYE, NIC and CIS deductions and on-line filing deadline for CIS300 monthly return to HMRC.
22nd of the Month:
Due date for electronic payments of PAYE, NIC and CIS deductions to HMRC.