IR35 payroll reforms will be extended to the private sector. Find out what that means for the UK oil and gas industry
It was announced during the Budget last year that the public sector off payroll reforms (“IR35”) will be extended to the private sector. The changes in IR35 will see responsibility for determining whether an engagement falls within the ‘IR35’ regime moving from the worker’s Personal Service Company (PSC) to the end user.
These changes will take effect from April 2020 and be limited to large and medium sized enterprises that engage contractors through PSCs.
Where an employment relationship is deemed to exist (or such a relationship would exist but for the existence of the intermediary), the end user of the services will be responsible for operating PAYE/NIC on payments made to those PSCs if it pays them directly
If the end user has contracted with an agency the end user will need to determine whether there is an underlying employment relationship, (but, if so, the agency will be responsible for applying PAYE/NIC to payments made to the PSC).
Further detail regarding the proposed operation of the new regime was published in an HMRC consultation document on 5 March 2019. At a high level, the focus of the consultation is on the following areas:
HMRC has also confirmed that it will continue to work with interested parties to implement improvements to their CEST tool and associated guidance, to ensure it meets the needs of the private sector. The consultation runs until 28 May, after which, we expect to see draft legislation published in the summer.
Please see a link to the recording of the WebEx we recently held on the subject here. A further WebEx will be taking place in late March, with invitations to be issued shortly to registered users of KPMG’s Employers’ Club – to register for our service please click here.
It is important that steps are taken now to ensure compliance because:
Based on our experience of working with public sector bodies, we know that it can take up to 18 months to ensure the relevant controls and processes are in place to cope with the new rules.
We are therefore recommending that businesses start to explore what steps they will need to take as soon as possible, so that they are prepared for these changes when they are introduced.