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Off-payroll working in the private sector reforms

9 months to go until April 2020

06/06/2019
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In the second of our 10 month series we examine the next step required to prepare for the new off-payroll working rules.

Step 2: Assess your risk and organisational needs

Having identified all key stakeholders and off-payroll workers in your organisation, this will feed into the next step of a two-fold assessment of the organisations’ risk appetite measured against the business needs.

Options going forward - 6 April 2020

   ic_keyboard_arrow_right_black_24px Employing the individual 
 ic_keyboard_arrow_right_black_24px Engaging with a PSC inside the rules (PAYE/NIC)
 ic_keyboard_arrow_right_black_24px Engage with self-employed individuals (no intermediary)
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Engaging an agency or umbrella company  

Risk and organisational needs

For those who are risk averse, the above outlines several alternatives to engaging off-payroll workers caught by the new rules, which may involve changing your business model.

Employers should evaluate their business and operational strategies in light of how exposed they are to these reforms and their future business needs – do you need to conduct a GAP analysis, or have internal discussions with key stakeholders?

If you wish to continue engaging with PSCs, then it will become the engager’s responsibility to perform and evidence an employment status check on the individual. Employment status is a subjective area based on case law rather than legislative tests and as a result, there is an embedded risk.

The risk of getting status wrong is expensive. ic_keyboard_arrow_right_black_24px  Back taxes four years or six years depending on which rules apply, NIC for six previous years. ic_keyboard_arrow_right_black_24px Risk of challenge from workers if wrongly classified - breach of contract?

 

Ultimately, what is right for your organisation going forward may differ from others, and therefore it is essential you take the time now to discuss these effects head of 06 April 2020.

Stage 1: identify key stakeholders and all off-payroll workers.

HMRC’s consultation on off-payroll working closed on 28 May 2019 and will inform the draft legislation on this area which is due to be published in the coming months.

While we wait for the draft legislation, an important first and proactive step is to identify key stakeholders and all off-payroll workers. This includes all current engagements with intermediaries including personal service companies and agencies that may supply labour to your organisation.

Completing these tasks early on will enable you to:

Step 1

 

Step 2

 

Step 3

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Evaluate how exposed is your organisation.

Do you mostly engage off-payroll workers in a particular business functions e.g. IT? Can this function be fully outsourced instead?

Are these workers engaged regularly?

 

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Communicate potential impacts to key stakeholders ensuring they are part of future discussions on this topic.

Who are the affected populations?

To feel comfortable with the position, do you need to conduct an employment status review on any individuals or seek specialist advice?

 

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Give yourself time to make and implement any changes needed ahead of 6 April 2020.

Including stage two which will be made available in the next issue of Employers Digest, our regular employment taxes newsletter.

Note: that any changes to off-payroll worker status may have an employment law impact as well as a tax and NIC implication, and so you should take all considerations into account.

Off-payroll working in the private sector reforms

The story so far and the processes to be put in place before April 2020.

Contact us

Caroline Harwood
Caroline Harwood
Partner, Head of Share Schemes and Employment Tax
London