How does the government’s plan to extend the rules for off-payroll working effect you?

From April 2020 the Government will extend the rules for off-payroll working that currently only apply to the public sector to the private sector.

The rules state that engagers (called “clients” by the legislation) have to determine the employment status of any workers they engage where the worker is providing their services via their own Ltd company. (The rules do not apply if the worker is self-employed.) 

HMRC have produced a tool to assist “clients” in making this determination: https://www.gov.uk/guidance/check-employment-status-for-tax

If the determination of the worker’s status is “deemed employee” then the fee-payer (either the “client” or maybe an agency) will have to make deductions for tax and NI from the invoice amount (excluding VAT) and also pay over employer’s NI/apprenticeship levy on this amount. 

A worker who is a “deemed employee” under the rules is not entitled to any employment rights such as sick pay/pension contributions etc

Within the private sector the rules will only apply when the “client” is a medium or large business, meaning that there is an exception for small businesses.  A small business for this purpose is defined as follows:

  • Annual turnover of no more than £10.2m
  • Balance sheet total of no more than £5.1m
  • Average number of employees is no more than 50

A “client” that is self-employed is small if they have fewer than 50 employees or turnover of no more than £10.2m.  If an organisation ceases to be small in an accounting period they will have to apply the new rules from the start of the tax year following the end of that accounting period.

If you think that you will be affected by these rules changes and you would like to discuss this we would be happy to help.  You can contact our tax team by phone on 01246 274121 option 2 or by email taxteam@mitchellsaccountants.co.uk