Where large or medium-sized organisations are paying workers via personal service companies or agencies they will need to operate new procedures from 6 April 2020.
The new rules will apply to partnerships, LLPs and larger charities as well as limited companies. Only those organisations that would be classed as “small” under the Companies Act criteria will be outside of the new rules.
From 6 April 2020 the end user organisation will be required to determine whether or not the worker would be an employee of the organisation if directly engaged. This employment status determination will need to be communicated to the agency supplying the worker so that income tax and national insurance is deducted from any payments.
The end user organisation should use the Check Employment Status for Tax (CEST) software on the HMRC website to carry out the determination. A copy of the determination should also be given directly to the worker.
WHAT IF THE WORKER DISAGREES?
Where the worker disagrees with the employment status determination they should contact the end user straight away setting out their grounds for disagreement.
The end user must provide a response within 45 days of receiving the disagreement. During this time they should continue to apply the rules in line with the original determination.
RADIO PRESENTER WINS IR35 PERSONAL SERVICE COMPANY CASE
The extension of the “off-payroll” working rules to the private sector mentioned above is planned for April 2020 but in the meantime tax tribunal decisions are still being decided against HMRC.
In a recent case involving a radio presenter working for TalkSport, it was decided that the presenter would not have been an employee if directly engaged. A key factor was that the the level of control over the presenter fell far below the sufficient degree required to demonstrate a contract of service.
The accountancy bodies have been lobbying the government to take the decision of the judges in this and the recent case involving Lorraine Kelly into consideration when they update the CEST software used to determine employment status.