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Will the Off-Payroll Working Rules Reforms Affect you?

Written on 15-Jul-2019

The government recently published the Finance Bill in which they Gov IR35confirm they will go ahead with the implementation of IR35 in the private sector in April 2020.

When the legislation is put into place next year, companies will have to check whether contractors need to pay income tax and national insurance contributions.

This means the responsibility for conducting the checks will move from the contractor to the organisation using their services.

Many recruitment agencies and industry bodies believe the rules are a problem for employers and contractors, but here at CJUK we welcome the reforms as we have always been proud about operating payroll for the candidates whom we supply to our hospitality partners, making the correct deductions at all times.

Contractor or employee? 

Companies that use contractors will have to decide for themselves whether each individual contractor falls within the bounds of IR35. Three of the key principles are as follows:

  1. How much supervision, direction, and control does the company have over how the worker completes their day-to-day work?
  2. Is it a personal service, or can the worker send a substitute?
  3. Is the company obliged to offer work and is the worker required to accept it?

Financial institutions will also be responsible for determining the employment status of each contractor or agency staff member.

Organisations falling foul of the new IR35 rules will have to pay the relevant taxes and fines which could amount to tens, if not hundreds, of thousands of pounds.

Katie MellorKatie Mellor, Director at CJUK, said:

“We have always been proud of the fact that we ensure any chefs provided to our clients are paying tax in the appropriate way.

We know that the majority of chefs working on a temporary basis cannot call themselves legitimately self employed and therefore should be paying tax through PAYE. The IR35 legislation will ensure agencies cannot treat chefs as ‘self employed’ when they are in fact a ‘worker.’

They should be making the necessary deductions for employees national insurance and paying employers national insurance.”

The rules will closely mirror those that were put in place in the Public Sector back in 2017:

  • Small companies will be exempt as per the Companies Act 2006
  • The end user will be required to pass both the employment status determination and reasons for this to the party below them in the chain, as well as the worker
  • The last party in the chain to receive the determination is classified as the ‘fee payer’ and will take the responsibilities
  • For a status determination to be valid, the determination has to include the reasons why this status has been concluded and that reasonable care has been taken
  • Contractors/PSCs can challenge the determination and clients are given 45 days to respond
  • If the client disagrees with the challenge, they have to provide the worker with reasons why they believe it to be correct
  • If the client agrees that the determination was incorrect, then they have to issue a new status determination

The impact on individuals

This measure is expected to impact 170,000 people working through their own company, who would be employed if engaged directly.

The good news is that those who are complying with the existing rules, such as Chefs on payroll with CJUK, should feel very little impact.

The measure is targeted at individuals who are not compliant, meaning that adhering to the off-payroll working rules could have a significant impact on their income available to them and their families.

WHAT CAN YOU DO TO PREPARE?

Whilst we are not qualified to offer professional advice on this topic, we have teamed up with an IR35 expert, Stephen Outhwaite of Outhwaite Associates, who is happy to offer assistance and professional advice.

 If you would like any information, please contact us today.

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