As an update to our previous blog, in this blog we wanted to provide further details of the scope, responsibility and impact to clients of the new Off-payroll rules. The new rules are timetabled to come in to force in April 2020. Although they are not yet finalised the below guide is based on what the legislation could look like:
Scope: Med-Large private sector organisations using the services of limited company (PSC) contractors.
Responsibilities: The client will be responsible for deciding whether the Off-payroll rules apply to an assignment and must take “reasonable care” when doing so. Off-payroll always applies to contractors holding an”Officer Role” for you and will apply to certain other roles where a contractor is “part and parcel” of your organisation.
It is advisable to form a team of individuals who can become subject matter experts who are trained to understand the process and the law, and can then make decisions as to whether the Off-payroll rules to a particular assignment. It should be noted that status can change mid assignment so decisions need to be regularly reviewed and parties notified if a status changes.
Impact: The criticality of the contractor, skills or role is likely to influence your decision-making. There may be an increase in rates for sought after skills or where there is a reduced supply of contractors. You should therefore plan for this.
Where a contractor falls within the off-payroll rules, the agency will need to remit taxes, Employers’ and Employee NICs and if applicable apprenticeship levy and pension contributions. Therefore, this extra cost of supply (circa 35%) may need be factored into the rates for the assignment if the contractor’s net income is to be protected when compared to paying via PSC.
If an assignment is outside of the Off- payroll rules then, the gross invoice will be processed as normal and IR35 will not apply.
What is NES Global Talent doing?
NES Global Talent has been working closely with its Trade Body the Association Professional Staffing Companies (APSCo) over the last year to ensure HMRC listened to the concerns of the Recruitment Profession, Limited Company Contractors and Clients. We also lobbied strongly for HMRC to implement the changes over a sensible time frame and address the concerns of all stakeholders. NES has also modified its payroll systems in order that it can deduct Income Tax and National Insurance as required, and we have amended our contractual documentation to reflect the new arrangements.
NES will continue to support both our Clients and Contractors to implement the new processes required and help both navigate the changes that will be necessary. We expect the new legislation to be published by the Government in late 2019. For Clients, NES will continue to provide updates in preparation for the implementation of the legislation in April 2020 when further information is released by HMRC. We will provide guidance on use of the new modified CEST tool.
Rest assured, Compliance and Customer Focus is at the heart of what NES does and we will be there to support you.