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Off-Payroll Working from April 2021 – new legislation published

Off-Payroll Working from April 2021

Amendments to the Finance Bill have been tabled which re-introduce changes to off-payroll working in the private sector, effective from 6 April 2021.

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Notwithstanding a report from the House of Lords recommending a wider review of the differences between employment and self-employment, amendments to the Finance Bill were tabled on 18 May 2020 which re-introduce the Government’s proposed changes to off-payroll working. These insert the provisions which would have taken effect from 6 April 2020, but were postponed because of the COVID-19 pandemic. A further amendment to the Finance Bill, which sought to delay the introduction of these measures until April 2023, failed to gain support. Assuming that this legislation is duly enacted by Parliament, it will come into effect from 6 April 2021. Businesses will need to ensure they are prepared for these changes.

The measures introduced in the House of Lords report are broadly similar to the draft legislation published in the summer of 2019. However, a number of changes have been made, including:

  • A new requirement that the end client must either be UK resident or have a UK permanent establishment in order for the new regime to apply;
  • A new requirement on private sector end clients to respond to requests by agents or workers as to whether they qualify as ‘small’ (and so meaning the engagement falls outside the scope of the new regime) within 45 days of the request being received;
  • The ‘client-led status disagreement process’ has been redrafted, with the onus now on the worker or deemed employer (i.e. the fee payer) to raise a dispute before the final chain payment is made. Businesses receiving a notice of dispute will still need to respond within 45 days confirming that either:
    • The original determination was correct and the reasons for that decision; or
    • The original decision has changed, the date from which the new determination applies and confirming that the original determination is withdrawn.
  • The legislation now includes provisions, previously announced, dealing with situations where HMRC consider there is no realistic prospect of recovery of PAYE due from fee payers within a reasonable period of time. These provisions allow HMRC to turn instead to either the end client or the next entity down the supply chain.

It is clear that the Government is committed to introducing the changes to off-payroll working from 6 April 2021, commenting that “it is hard to see any genuine rationale for any further delay”.

Businesses that are currently focused on headcount and resourcing strategies in light of COVID-19 should bear these legislative changes in mind when undertaking such planning.

A number of organisations found themselves short of time to implement the new regime in April 2020, given the number of commercial issues to be resolved and the time needed to undertake status assessments of workers potentially falling within the new rules.

As such, the delay to implementation was welcome, but it is important that businesses ensure they complete their preparations for the new regime in sufficient time to be fully compliant from 6 April 2021. Whilst many businesses will currently be focused on the people and business implications of the COVID-19 pandemic, we recommend that there is re-engagement on the off-payroll working rules by September at the latest.

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