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
- Have a turnover below £10.2 million
- Balance Sheet worth less than £5.1 million
- 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