Month: February 2020

Off Payroll Working Rules – April 2020 Changes

The organisation receiving an individual’s services will be responsible for determining whether the off-payroll rules apply, so in other words the fee payer is responsible for tax and NI deductions.

From April 2020 the rules apply to Large and Medium business as well as the Public Sector, the rules are to combat none compliance with IR35.

A client organisation could be

  • a company
  • a limited liability partnership
  • an unregistered company
  • an overseas company

You can check status using the CEST – Check Employment Status for Tax – tool.

The changes don’t apply to Small businesses/organisations employing contractors, to qualify a business or organisation must

  1. Have a turnover below £10.2 million
  2. Balance Sheet worth less than £5.1 million
  3. not more than 50 employees

If the rules apply the Fee Payer is not responsible for

  • Statutory Payments
  • Deducting Student Loan repayments
  • Automatic Enrolment into a pension
  • Holiday Pay

The Client has to demonstrate reasonable care in testing employment status and apply the new rules.

The Fee Payer (Client) is responsible for

  • Calculating deemed direct payment
  • Deducting tax and employee NI
  • Reporting and paying tax and NI including employer contribution
  • Consider if Apprenticeship Levy applies

Client Organisation now need to:

  • Review current contracts and arrangements
  • Establish processes for status decisions
  • Review internal systems for Payroll, HR and on-boarding

The changes don’t affect VAT

steve@bicknells.net

Are you an agent for supplies to your clients? VAT

You’re an agent if you act for, or represent, someone else (your principal) in arranging supplies of goods or services. The supplies that you arrange are made by, or to, the principal you represent.

Principals cannot avoid their liability to account for VAT on their supplies or to pay VAT on their purchases by using an agent.

Persons who carry on a business on their own account sometimes use the words ‘agent’ and ‘agency’ to describe their trading style. For example:

# distributors, sole concessionaires and motor agents usually trade as principals on their own account
# employment agencies and travel agents are not usually agents in all their activities

On the other hand, some people who normally trade as principals, such as solicitors and architects, may occasionally arrange supplies as agents for their clients.

To act as an agent, you must have agreed with your principal to act on their behalf in relation to the particular transaction concerned. This may be a written or oral agreement, or merely inferred from the way you and your principal conduct your business affairs. Whatever form this relationship takes:

# it must always be clearly established between you and your principal, and you must be able to show to HMRC that you’re arranging the transactions for your principal, rather than trading on your own account
# you will not be the owner of any of the goods, or use any of the services which you buy or sell for your principal
# you will not alter the nature or value of any of the supplies made between your principal and third parties

https://www.gov.uk/guidance/vat-guide-notice-700#section22

Supplies made through an undisclosed agent are those where the supplier and purchaser are not known to each other as the agent acts in his own name.

Supplies of goods through an agent acting in his own name are treated as to him and by him and consequently count towards his turnover for VAT registration.

VQOTW: Agency Status and Impact on VAT Turnover

steve@bicknells.net