Unwrapping Off-Payroll Working / IR35 – Planning ahead for 2021

With the introduction of the off payroll workers legislation in the private sector for medium and large organisations fast approaching on 6 April 2021, it is crucial to ensure your preparations for these important changes are not left to the last minute.

The changes from 6 April 2021 also bring new demands on public sector organisations too meaning all organisations should be undertaking some planning to prepare.

What are the Off Payroll Working Regulations?

OPW has probably been better known as “IR35” in the UK. It is effectively new legislation which requires medium and large businesses to have controls in place to identify, assess and determine the employment status for income tax/NIC purposes of contractors engaged via an intermediary (i.e. typically a Personal Service Company or Partnership)

The April 2021 changes also provides new guidance for public sector bodies who have been required to abide by OPW legislation since April 2017.

In short, instead of the intermediary being responsible and ultimately culpable for any income tax or NIC liabilities should HMRC challenge the employment status of the engagement successfully (as is the case in the Private Sector up to April 2021 and was the case in the Public Sector up to April 2017), the new OPW regulations mean that the end client is responsible for determining the employment status of the engagement and deciding if income tax and NIC needs to be deducted via payroll. Where HMRC finds fault it will be able to challenge the end client for any liabilities, making the compliance process more transparent than has been the case historically, particularly in relation to who HMRC challenge.

Who does it affect?

  • A worker who provides their services through their intermediary
  • A client who receives services from a worker through their intermediary
  • An “agency” providing workers’ services through their intermediary

For completeness, it does not impact on off payroll engagement that are direct with individuals. If HMRC successfully challenge this engagements, the income tax and NIC liability will already sit with the fee payer/end client.

What is key to consider?

From feedback, many organisations have not been clear in how to establish controls in managing this risk area given the complexities and variety of stakeholders involved. We have therefore been helping organisations get to grips with the practicalities and ensuring they can:

  • Identify which engagements may need to be considered further; and
  • Once identified, practically carry out a robust employment status determination.

Using technology and specialist support

To help organisations, we have developed a technological solution to help manage the following:

  1. Identification – using a list of all your existing suppliers, our technology will “mine your data” to help cut through the arduous task of identifying ‘at risk’ suppliers, i.e. those who will be within the scope of the changes from April 2021. This will help reduce administration time and also provide comfort that suppliers have not been missed from your own review.
  2. Assessment – once identified, our technology will provide our view of the likelihood of an engagement falling with IR35. Alongside our specialist advice, it will also provide a clear we Status Determination Statement (SDS) as required under the legislation from 6 April 2021.

This enables us to utilise our experience advising on employment status with technology that creates a clear, consistent and effective approach for all parties.

Find out more

Our video below provides further detail on our technology and approach to help you manage off payroll working in a reasonable, robust and efficient manner.

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If you would like to know more about IR35, please contact us using the form below today.

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