Off Payroll Working—April 2021 Changes for the Private Sector
What’s the new law all about?
On 6 April 2021, the delayed off payroll working/IR35 rules take effect in the private sector, being brought in to address non-compliance with IR35 in the private sector. The new law:
applies when an individual provides services personally to a client/end user via a qualifying intermediary (personal service company, partnership or individual);
moves responsibility for determining employment status and deducting payroll taxes to the client/end user.
Do the new rules affect me?
The law affects all UK businesses that use intermediaries other than those in the small business exemption, and requires cooperation along the contingent labour supply chain.
Is “doing nothing” an option?
Not without risking a tax bill, HMRC investigation and bad press.
What must end users do to comply?
Use reasonable care to make employment status determination statement (SDS)/IR35 assessments for theircontractors, asking if, absent the intermediary, the nature and conditions of the work would cause the worker to be classed, for tax purposes, as an employee;
before first payment, provide a copy of the SDS, and rationale, to the contractor and down the supply chain;
implement a process for resolving employment status disputes (and appeals); respond to challenges within the 45 day time limit.
As end users, what steps should we be taking now?
The team: Who will take ownership of off payroll working compliance? Multi-disciplinary: HR, tax, procurement, legal.
Audit of contingent workforce and review of labour supply chains: Who are your contractors and how are they engaged (e.g., directly, through personal service company or umbrella)?
Assess the impact of the new regime: Carry out SDSs and analyse what impact the new regime will have. Do engagements need ending, or renegotiating? Do working practices and arrangements need to change?
Implementing compliance process going forward: How will new contractors be identified? How will working practices be monitored and how will SDSs be kept up to date?