Off payroll working in the private sector – IR35

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Guest blog by Caroline Colliston of DWF LLP

Do you provide your services or engage with consultants via a personal service company? This type of arrangement is dealt with via tax rules that apply to intermediaries also known as IR35.

Draft legislation has been published which changes the operation of IR35 for all public sector clients and private sector companies (including the third/charity sector) that meet two or more of the following conditions:

The changes are expected to apply to contractual payments made on or after 6 April 2020.

All parties to labour supply chains will need to be aware of their obligations under this new legislation.

The effect of the changes is to shift the burden of assessing whether the payroll legislation applies to the engaging entity/end client rather than solely relying on the intermediary or personal service company to deal with its own tax.

It is worth noting that even if the end-client is not the actual fee payer, it might still be liable for payroll deductions if the fee payer defaults in its obligations to account for payroll taxes.

Some key changes – to be aware of:
Key takeaway

The key takeaway is wherever you sit in the labour supply chain, the onus is now on you to take action to ensure that you know where the burden and risk of operating PAYE on any payments under off-payroll arrangements (and the risk of penalties and interest for non-compliance) sits in your labour supply chain.

Contract review is essential and amendments may be required to include indemnity protection and obligations to share information.

It is advisable for business to establish a status disagreement process and for those contracting with businesses to understand how that will operate.

Robust internal processes for onboarding contractors and assessment of tax status (and audit of the same) will be required.

If you would like to discuss how we can help your business prepare for the impending changes to IR35, please do not hesitate to contact: Caroline Colliston, Corporate Tax Partner, and DWF LLP.

Caroline Colliston
Partner, Corporate Tax
T 0131 474 2333
M 07841 843 744
E Caroline.Colliston@dwf.law

 

Disclaimer: The above is a general overview only and does not constitute legal advice.

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