The draft Finance Bill clauses issued for consultation on 11 July include legislation to extend the “off-payroll” working rules to the private sector from 6 April 2020. These changes will have significant implications for workers providing their services through personal service companies and also the end user organisations that engage such workers.
End users will be required to determine whether the worker would have been an employee if directly engaged and hence the new rules apply to the services provided by the worker via his or her personal service company. This will be a significant additional administrative burden on the large and medium-sized businesses who will be required to operate the new rules. The current CEST (Check Employment Status for Tax) online tool would be improved before the proposed start date.
If the end user decides the worker would have been an employee then they have to deduct PAYE from the payments owed to the workers company.
“SMALL” EMPLOYERS EXCEPTED
“Small” businesses will be outside of the new obligations and services supplied to such organisations will continue to be dealt with under the current IR35 rules, with the worker and his or her personal service company effectively self-assessing whether the rules apply to that particular engagement.
The draft Finance Bill confirms that the definition of “small” is linked to the Companies Act 2006 definition – An eligible company will qualify as small if it meets at least two out of three of: turnover: not more than £10.2m; balance sheet total: not more than £5.1m; and. average number of employees: not more than 50.
Remember – this is not your business size it is the size of the company you are working for!