The government is seeking your views on this important change.
The consultation on off-payroll working rules highlights the public sector reform that is being extended to the private sector and will apply from 6 April 2020. It is open for comment until 28 May.
The consultation asks for views and information on several subjects, including:
the scope of the reform and impact on non-corporate engagers
information requirements for engagers, fee-payers and personal service companies
addressing status determination disagreements.
At this stage the government has decided ‘that the smallest organisations will not be affected by the reform and will not need to determine the status of the off-payroll workers they engage'. However, that is only regarding operating the rules and requirements. Many small businesses will be impacted if they work with larger businesses.
We may have differing rules for businesses when they work with:
medium and large businesses
all other businesses.
A small business, incorporated or unincorporated, in the proposal follows the Companies Act definition (see below), tweaked to remove the balance sheet total requirement for unincorporated businesses.
Companies Act definition of ‘qualifying as small’
The qualifying conditions are met by a company in a year in which it satisfies two or more of the following requirements:
1 Annual turnover Not more than £10.2m
2 Balance sheet total Not more than £5.1m
3 Number of employees Not more than 50
The document is clear that ‘the reform requires the fee-payer to operate the rules for tax, NICs, and the Apprenticeship Levy in the same way as for a normal employee’.
Regarding the status of a party supply labour in the supply chain the government are clear that they consider that ‘it is necessary to legislate to ensure that the determination – and the reasons for that determination – are cascaded to all parties within the labour supply chain, to ensure they comply with their obligations’.
Also note that for those supplying medium and large businesses the provisions to address double taxation will continue to follow the public sector tax treatment being:
‘the worker’s PSC is able to set the amount of the deemed payment against the amount of remuneration from the worker’s PSC on which tax liabilities arise. The corporation tax computation should be adjusted so that the worker’s PSC cannot claim a double deduction for the costs associated with the engagement’. And that as ‘with public sector engagements the worker’s PSC will no longer be permitted to deduct a 5% allowance in relation to engagements with medium and large-sized clients'.
We strongly encourage you to look at the proposed changes and comment on them if appropriate. Please do also share your comments with us via email to email@example.com (all replies treated in confidence).