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.
IR35 in the Private Sector
The Government plans to introduce new legislation to extend the IR35 reforms to the private sector from April 2020.
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.
You can find out more about IR35 in the private sector here and download our brochure that explains how to understand the impact of IR35 reforms on your business.
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 2020.
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
Download our flyer on managing the risks of Off-payroll labour here.