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. That determination will need to be communicated to the agency supplying the worker so that income tax and national insurance is deducted from any payments. Where there is no agency the end user themselves will need to make the deductions and pay across to HMRC.
The end user organisation can 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. However the CEST tool in its current form cannot always be relied upon to produce a decision and in marginal cases businesses are advised to take professional tax advice.
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.
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. The CEST tool is due to be updated before the new rules come into play in April 2020.
James Geary is Head of Corporate Tax and is presenting at a breakfast event titled ‘Understanding IR35‘ in conjunction with Infosec People on Thursday 31 October. Contact James on 01242 776000 or firstname.lastname@example.org if you would like to talk through your circumstances.