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  • Off-payroll Labour

Off-payroll Labour

IR35 Private Sector Reforms Postponed to April 2021 - as part of the additional measures announced to support businesses and individuals to deal with the economic impacts of Covid-19, it was announced on 18 March that the implementation of the Private Sector IR35 Reforms would be postponed until April 2021. There is currently little detail in support of this announcement, however the key message is that this is a deferral of the new rules not a cancellation. Once more information has been provided by HM Treasury will be able to provide a more comprehensive view on the potential impact this change will have on affected organisations businesses and individuals.

Off-Payroll Labour involves the engagement of individuals for services that are paid outside the payroll. This could include consultants, subcontractors, associates or directors paid via an agency, a limited company (Personal Service Companies, “PSCs”), partnership or on a self-employed basis. The individuals could be used in your business or for onward supply to your clients/customers.

HMRC will always test practices relating to the employment status of individuals, i.e. those engaged directly on a self-employed basis, to ensure taxes are correctly paid/withheld. HMRC further expects employers to consider IR35, the intermediary rules, offshore host employer rules and, where relevant, the public sector rules.

See BDO's Off-payroll labour tools

IR35 in the Private Sector

The Government's response to its implementation review formally confirms that it will extend the IR35 reforms to the private sector from April 2021.

This means that if you engage workers who are paid off payroll, via a PSC or other intermediary, you will have to assess if the IR35 rules apply. If so, a tax/NIC deduction may be required on payments made to the PSC and there will be an employer’s NIC liability for the paying party.

We have a range of articles, updates and guidance on the implementation of IR35 in the private sector. Click here to read our summary, full brochure and to take our survey.

Potential risks

The cost of getting things wrong can be huge and now is the time to assess your organisation’s risks. Potential risks arise from engaging or being involved in the supply of any Off-payroll labour, including self-employed individuals, consultants, executive and non-executive directors (NEDs) invoicing via PSCs. The public sector rules are already in force but, for those in the private sector, the position must be considered and addressed prior to April 2021.

Tax risk assessment

Our Off-payroll labour tax risk assessment is designed to identify the potential areas of employment tax risk to your business and establish what course of action should be taken to mitigate the risks identified.

If relevant, the assessment will consider:

  • Employment Status
  • IR35 rules
  • Public bodies and the intermediaries rules
  • Private Sector and IR35 Reform
  • NEDs and office holders
  • Engagement of subcontractors within the Construction Industry Scheme
  • Agency rules
  • Offshore intermediaries
  • Oil and Gas sector workers
  • Intermediary reporting obligations