From April 2020 the off-payroll tax rules, more commonly referred to IR35, will be applied to the private sector for the first time.
This controversial change will see many contractors and consultants who work through a personal service company (PSC) reclassified as workers, which will mean that they and their employers may be required to pay National Insurance Contributions (NICs) for the first time.
The new rules only apply to medium or large-sized businesses and will require employers to assess each individual’s employment status under the IR35 rules.
Those found to be within the rules will have their income tax and NICs deducted from them via PAYE.
This change will have a substantial effect on the way that contractor’s and consultant’s income and benefits are reported and the way in which tax due is paid.
For some individuals it may mean that they no longer need to report income via a tax return and they may find that not only do they have to pay additional NICs.
As a result of this their tax bill may increase as well due to the way in which their finances are reported by their employer via PAYE.
Designed to prevent ‘disguised remuneration’, these rules are already in place within the public sector where they have been found to be very onerous for employers and have led to several high-profile tribunal appeals that have involved high profile TV presenters.
Employers must not underestimate the impact of this change and should begin planning ahead for IR35 by using the Government’s Check Employment Status for Tax (CEST) service to begin to identify those most likely to be affected by the rule change.
Our team at MJ Bushell are also standing by to lend assistance with IR35 and its requirements. If you are concerned about these changes, please speak to our team today.