Amendments have been made to the Off-Payroll Working (OPW) legislation that comes into force from 6 April 2021. Following HMRC’s recent announcement of their compliance and enforcement approach, businesses should take steps now to ensure they are compliant.
What are the Finance Bill 2021 changes?
Currently, where a worker’s services are provided through a corporate intermediary such as a Personal Service Company (PSC), the worker must have a ‘material interest’ in the PSC for the OPW rules to apply.
Finance Act 2020 amended this condition so that, from 6 April 2021, the OPW rules would apply where the worker does not hold a material interest in the intermediary but they receive, or have or could have an entitlement or expectation to receive, a ‘chain payment’ from the intermediary. This change was made to counter potential avoidance of the OPW rules but had the unintended consequence of capturing any arrangement where a worker operates through a company, even if the full payment had been taxed as employment income (for example, under umbrella company structures).
Finance Bill 2021 therefore makes a further amendment to narrow the scope of this change to cases where the ‘chain payment’ does not, or will not, wholly comprise employment income in the hands of the worker in any event.
Other changes that have been made are as follows:
- So that parties in the labour supply chain can more easily determine whether an engagement is within the OPW rules, the requirement that the worker should confirm (to the person paying them) whether or not their intermediary falls within the definition of companies, partnerships etc. covered by the rules is extended to apply to the intermediary as well, where the worker fails to do so; and
- To prevent client organisations or deemed employers facing a potential liability when provided with fraudulent information by a party other than the worker (or a person connected with the worker),the legislation now provides that liability will rest with that party in circumstances where that party is a person who is resident, or has a place of business, in the UK.
What should organisations do now?
The new OPW rules will take effect from 6 April 2021. Specific points to consider in the few weeks to 6 April 2021 include:
- Are the new systems, processes and documentation robust enough? - Robust systems and processes demonstrate reasonable care and are necessary to meet the demands of the Senior Accounting Officer regime. How comfortable are you that you can demonstrate your decisions on status are rigorous?
- Have all off-payroll workers been identified? - Have you completed a robust assessment of your contingent labour to ensure you have identified all potentially impacted workers? How will you ensure this remains up to date as more suppliers are engaged and other engagements evolve? Have you considered your position on outsourced services?
- Has the impact on supply chains been thoroughly reviewed? - Do you know how any employment agencies you engage with contract with the people they provide? Are they all on the agency’s payroll, or could they be engaged via individual PSCs meaning you need to issue status determination statements? Have you reviewed your contractual arrangements to ensure responsibilities are clear and where any issues could arise you are appropriately protected?
- Are day-to-day engagement activities reflected in status determination decisions? - Determinations must be based on the highest quality information and a full understanding of all relevant facts – and be revisited as and when those facts change. Are your line managers fully aware of what you need to know about the practical realities of how engagements are operating and what to do if they change?
- Are your organisation’s policies clear across the supply chain? - Suppliers, line managers and the rest of your organisation must be clear on your policies and what’s expected of them.
- Is the dispute process effective? - Have contractors been given opportunities to ensure you’ve taken their personal business positions fully into account? Do you have a fair and compliant process to effectively communicate your decisions if appealed by an agency or contractor? This can be particularly sensitive, and it is important that the process is robust.
How KPMG can help
We have extensive experience of assisting organisations prepare for the new regime and have developed a suite of technology solutions that includes:
- A tool to identify workers and confirm the existence of PSCs with Companies House;
- An employment status assessment tool tailored to the role profiles that exist in the organisation; and
- A workflow tool to share information, provide status determination statements and resolve disputes (which also captures and stores relevant information for presentation to HMRC in the event of a review).
If you would like to talk through how KPMG can help your organisation prepare for the new OPW regime, please get in touch with your normal KPMG contact.
For further information please contact :