Act now or PAYE later
By Sarah Wood | 29th January 2020
New rules coming in this April could change the way your business pays contractors. If you are unsure how this could affect you, Hazlewoods can help.
If your business engages with contractors, you may already be aware of the off-payroll working rules (often referred to as IR35). The rules apply to people working like employees, but operating through a personal service company (PSC). Currently it is the PSC's responsibility to decide whether the off-payroll working rules apply when engaged by a private sector company and to account for any PAYE and NICs due to HMRC.
From 6th April, medium and large private sector firms (based on the Companies Act definition) will need to assess the employment status of contractors operating through a PSC, shifting the responsibility for making this assessment from the contractor to your business. These rules have already been in place for the public sector since April 2017, but there are a few crucial differences.
To avoid costly tax implications and potential penalties, it is important that you review all your engagements with your contractors now to ensure you aren't breaking the rules. Failure to comply with the rules may result in the worker's tax and NICs liability becoming the responsibility of your business.
If your contractor is within the scope of IR35, the easiest thing to do is to engage them as an employee. Many businesses may be reluctant to take this step, as there would be additional costs to consider such as pensions auto-enrolment and holiday pay. You can continue to engage with their PSC, but if your company is the entity paying the PSC, or via an agency, then you would be responsible for ensuring PAYE and NIC are deducted from the payments made to them.
Local firm, Hazlewoods, has a specialist employment taxes team, which is able to provide advice on the tax implications of your contracts and working practices.
To find out more and have the opportunity to get your questions answered, Hazlewoods is running a seminar on Thursday 13 February on the new rules as well as some other topical employment tax updates.
To find out more and register your interest go to: https://www.hazlewoods.co.uk/news/events/understanding-off-payroll-working-in-the-private-sector
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