Find out how to prepare for changes to the off-payroll working rules if you engage contractors working through their own limited company.
The changes to the off-payroll rules due to come into effect on 6 April 2020 have now been delayed until April 2021. This is because of the spread of the coronavirus (COVID-19) and is to help businesses and individuals deal with the economic impact of coronavirus.
This is a delay to the introduction of the changes and is not a cancellation.
What will change
From 6 April 2021 the:
- rules for engaging individuals through personal service companies or other intermediaries are changing
- responsibility for working out if the off-payroll working rules (IR35) apply will move to the organisation receiving an individual’s services
You should make sure you understand:
- the impact of the changes on your organisation
- actions you might need to take before the changes come in
Before you apply the new rules
Before you apply the new rules you should check what HMRC support is available to help you understand the rules. Finance, HR and recruiting managers will also need to understand the changes.
Steps you may need to take
1. Look at your current workforce
This includes those engaged through employment agencies.
Identify individuals who are supplying their services through their own limited company (sometimes known as a personal service company) or other intermediary.
Put in place processes to identify future individuals who work in this way.
2. Talk to individuals and agencies you engage with
You may need information from them on some engagements.
Share the contractor factsheet to help your contractors understand how the changes may affect them.
3. Determine if the off-payroll working arrangements apply
Check if the rules apply for any contracts that will extend beyond, or start after 6 April 2021.
Decide who in your organisation should make an employment determination.
You can use HMRC’s Check Employment Status for Tax (CEST) service to make determinations.
Look at escalations for difficult cases.
Make a determination ahead of April 2021 - as long as the information remains correct.
4. After you’ve determined if the rules apply
You’ll need to tell the contractor (and any agency you engage with) the outcome.
Use a Status Determination Statement (SDS) to tell them.
5. Who will operate PAYE
Consider if you or an agency will have to operate PAYE.
If you’ll need to operate PAYE, put in place processes to make sure the correct Income Tax and National Insurance contributions (NICs) are deducted for engagements inside the rules from 6 April 2021.
6. Dealing with disagreements
You’ll need to set up a process to deal with any disagreements about the employment status determination. This is a legal requirement.
7. Keep records
You’ll need to make sure you maintain a robust audit trail. It is a legal requirement to keep records.
8. Test your processes
You’ll need to test your processes, systems and controls to make sure you’re ready.
9. Changing working practices and contracts
You should follow the processes you’ve set up to revisit status decisions and make new ones if you:
- change working practices
- change contractual arrangements
- renew contracts
- create new contracts
You can find more information about the April 2021 changes for off-payroll working and who it affects.