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From 6 April 2021, changes to the off-payroll working rules in the United Kingdom will apply when a company is engaged with contractors working through their own limited company.

The most important part of the change is that the responsibility for determining whether the off-payroll working rules apply will shift from the contractor’s personal service company (PSC), to the client organisation engaging them.

HMRC recommends companies look at their current workforce including those engaged through employment agencies and identify individuals who work through their own limited company (the rules do not apply to self-employed individuals).

Where a contractor provides their services through a PSC, from 6 April 2021 it is the responsibility of all medium and large-sized private and voluntary sector organisations, and all public sector organisations, to assess the contractor’s employment status for tax purposes.

If the rules apply, the client organisation, or the agency or third party paying the contractor’s PSC, is then responsible for accounting for employment taxes and NICs.

Organisations can use HMRC’s Check Employment Status for Tax (CEST) service to determine whether the rules apply to certain individuals. The Status Determination Statement (SDS) should be filled out to inform individuals about the outcome.

Once the status is determined, companies should find out whether it is the agency or the company itself who will operate the PAYE.

In case the status of some inviduals need to be changed, companies should take a closer look if contractual arrangements need to be revised, renewed or new contracts need to be created.

HMRC ensured that companies will not have to pay penalties for inaccuracies in the first 12 months relating to the off-payroll working rules, regardless of when the inaccuracies are identified, unless there’s evidence of deliberate non-compliance. This commitment has not changed.

>>> For step by step instructions visit HMRC’s relevant page HERE <<<


Photo credits @ „Payroll” by Matt From London is licensed under CC BY 2.0

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