Following the first round of changes to IR35 in 2017 to the public sector, HMRC has announced it is again to review and implement changes to the off-payroll working scheme in the private sector.
Such changes will radically affect the recruitment industry, and as ‘knowledge is power’ it makes good sense for agencies to be aware of any suggested changes so preparations can be made in good time.
How Will These Changes Affect the Private Sector?
The proposed changes will enforce even more stringent checks on private sector, off-payroll workers, to clear up any confusion over where tax and national insurance liabilities lie. Should the contractor be deemed an employee, Income Tax and National Insurance will now be payable by the agency.
For a more detailed analysis clear on this link: Off-payroll working rules from April 2020.
Eradicating Unlawful Working Practices
The most predominant change will be ensuring the correct status of any contractors to determine if they are off-payroll and therefore obliged to conform to IR35 regulations.
This is to eliminate contractors who essentially have working practices that mirror employees but have the tax advantages of contractors - in essence, ‘having their cake and eating it’ through unlawful working practices.
It is thought that these new rulings will affect thousands of workers, working for large corporations that make up so much of the private sector.
Is Your Customer’s Business Exempt?
For SMEs it is worth noting that businesses with under 50 staff or with an annual turnover of less than £10.2 million will be exempt from any new changes and rulings. As an employment intermediary in the supply chain, it will be the agencies responsibility to gain evidence of the status of each worker currently not engaged on a PAYE basis.
Recruitment agencies are expected to play an essential role in making off-payroll contractors aware of the new IR35 rulings.
Currently, many businesses are struggling to clarify whose responsibility it is to ensure tax and national insurance is paid. The new changes, HMRC say, will clarify this.
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