IR35 – Off-Payroll Working

By Ezra Moffatt

Associate Legal Executive

The Finance Act 2017 introduced new rules for payment made by, or on behalf of, public authorities to intermediaries that provide the services of workers.

The draft Finance Bill 2020 legislation extends these rules to medium or large private sector clients and is due to come into force in April 2020. Small entities are excluded from the scope of the new rules.

The new legislation is aimed at personal service companies, partnerships and individuals that act as intermediaries in providing the services of an individual to perform services personally. They require that the worker must notify the end client as to whether or not they potentially fall under the definition of an off-payroll worker. The onus is then on the end client to determine whether they would be a ‘deemed employee’.

A ‘deemed employee’ is someone whose services they personally provide, or are under an obligation to personally provide to the end client, are similar to those of an employee or if, through the contract, the worker is an office holder of the client or of an entity associated with it. If the individual is deemed to be an employee then tax should be deducted from their fees under PAYE.

The impact of off-payroll working on existing contracts is that if the individual is a deemed employee, the end client will be responsible for the 13.8% employer’s NIC and 0.5% apprenticeship levy on top of the payment to the personal service company.

In order to prepare for the legislation coming into force there are some key steps that end client users can take now. These include:

  • Carrying out a full contractor audit
  • Determining existing contractors’ IR35 status on a case by case basis
  • Being prepared to be adaptable until the final guidance is issued
  • Taking action to renegotiate or cancel contracts accordingly
  • Having 2020 compliant contracts ready for new contractors who will be in place in April 2020

For more information on how you may be affected by the upcoming changes, please contact Ezra Moffatt on 01279 712571 or fill in our online enquiry form.