IR35 Extended to Private Sector

IR35 Extended to Private Sector

From 6 April 2020, new “off-payroll” rules will apply where a large or medium-sized company contracts with a third party for the supply of workers and the arrangements involve an intermediary such as a personal service company [“PSC”].

Although there is an exemption for small companies, this will not apply where the company is a member of a large or medium-sized group.

The legislation is still in draft form but the current version of the rules is summarised below:

  • The company must decide the employment status of each worker and prepare a “status determination statement”.
  • If the worker disagrees with the status determination, the company must reconsider the conclusion and reconfirm the decision within 45 days.
  • If the decision is that the worker should be treated as an employee, the company must include the worker on the payroll and account for PAYE and NIC on the payments to the PSC.
  • If there are additional parties in the supply chain, the rules are more complicated but the company will remain responsible for determining the worker’s employment status and may face secondary liability for unpaid PAYE and NIC.

The rules do not apply where a worker is supplied by an agency which employs the worker and operates PAYE.

If you think that the rules may affect you, the following action should be taken:

  • Review your workforce in order to identify individuals who are supplying their services through PSCs.
  • Provide any individuals identified above with a status determination statement before 6 April 2020.
  • Add any workers with employment status to the payroll.
  • Put processes in place to deal with disagreements and ensure that status determinations are carried out for future engagements with intermediaries.

Please contact us if you have any queries on the above.