New "Off Payroll Working Rules" and HMRC responsibilities

FROM April 2020, medium and large businesses will be responsible for determining whether “workers” should be officially registered as “employees” and, as a result, potentially lead to a change in many workers’ contracts, as legislation known as “IR35” officially comes into force impacting thousands of businesses and individuals.

IR35 legislation was originally introduced in 2000 to ensure individuals hired by a business, who would ordinarily be deemed “employees” – if they had been engaged directly – broadly paid the same tax and National Insurance as employees. Businesses for many years have been obliged to undertake the “self-employment v employed” test but IR35 obligations previously fell to the individual (worker) who provided services through an intermediary (eg through another a company) to another person or entity.

Unfortunately, HMRC does not believe the rules have been followed, resulting in lost income to the Treasury and unfairness, and from April 2017 new legislation was introduced that meant the public sector engaging with a worker became responsible for determining the status of the worker, and now, from April 2020, this rule will apply to medium and large private businesses.

For those businesses in the medium/large category ie. meet two or more of the following: £10.2m+ turnover, £5.1m+ balance sheet, 50+ employees, this will mean undertaking a close assessment of those working on behalf of the business and vice versa. There are added complications too in the way the financial year and calendar year figures are calculated.

Karen Thomson, head of Armstrong Watson payroll said: “Whilst, the criteria for IR35 hasn’t changed, who the obligation falls upon to assess and report it has. Anticipation of this change in legislation is already causing confusion and concern in the construction and engineering sectors, where projects are heavily reliant on agency workers. Both large and small clients, as well as supply chain consultants and contractors need to fully understand their obligations and mitigation options.

“It is vital that those who work through an intermediary – such as their own personal service company, agencies, accountants and agents who engage the services of a worker, HR managers and of course anyone involved in payroll – are aware of these changes, as soon it will be the responsibility of an employer or engager to assess a worker’s status.”

Call Ms Thomson at Armstrong Watson on 0808-144-5575 or email