UNITED KINGDOM - 2018 Budget
Off-payroll rules extended to the private sector
HMRC has been placing greater scrutiny on off-payroll rules (IR35) and the way it affects those that are employed through Personal Service Companies (PSCs). This initially impacted the public sector and there is an expected extension of these rules to the private sector, taking effect in April 2020.
- The new rules will require businesses to assess whether IR35 applies to any contracts it has with any PSCs, whether directly hired or via other third parties. If it does then a tax deduction from any payments made under the contract will be necessary and the business will also suffer Employers NIC and Apprentice levy costs (if applicable) on the payments. A potential 14.3% increase in operating costs, and both worker and engager will be impacted;
- A consultation will be launched next year and whilst we have yet to see whether the public sector rules will be modified before being introduced into the private sector, we don’t anticipate significant change;
- It’s a common misconception that IR35 automatically applies but this will depend on the fact pattern for each contract. HMRC has on-line tools that can assist in an IR35 review but our experience is that a more in-depth look is often required to establish the precise impact on your business.
Companies also need to be mindful of the fact that these rules will not only potentially impact those individuals that they engage with in the UK; it may also affect those that come from overseas or are contracted outside the UK.
How can BDO help?
BDOs experience in the public sector has helped us develop a 3-stage strategy to minimise the impact of the new IR35 rules:-
- Help identify what contracts may be at risk;
- Assess both the potential financial and operational impact on your business;
- Implement changes that will minimise the impact of the new rules and build a robust compliance structure for the future.
Short-Term Business Visitors
As of April 2020, the administrative burden for employers in relation to certain short-term business visitors will be reduced. The Government has announced that it will widen eligibility for the Short Term Business Visitor’s Pay as You Earn special arrangements and extend the deadline for reporting and paying tax.
For more details about the 2018 Budget, visit our Budget Hub.