Today, HMRC updated their IR35 Factsheet. As I’m sure you’re aware, from 6 April 2020, Interim Managers and Contractors will be affected by the changes to the IR35 rules if they work through an intermediary, such as their own Limited company, sometimes referred to by HMRC as Personal Service Companies (PSC), and provide services to medium or large-sized organisations, defined as having a turnover of more than £10.2m, a balance sheet total of £5.1m and/or more than 50 employees.
When the rules come into force in April, medium and large-sized organisations will be responsible for assessing the employment status of Interim Managers and Contractors for tax purposes and will provide a ‘status determination statement’ for each non-employee they engage. This is a significant development from the current arrangement where Interims and Contractors are responsible for determining their own employment status.
If an organisation determines an Interim Manager or Contractor is employed for tax purposes, they will pay the necessary tax and National Insurance (NICs) before they pay the Interim Manager or Contractor. If the organisation assesses the guidelines and determines that an Interim Manager or Contractor should not be considered an employee, the Interim Manager or Contractor will remain responsible for meeting their tax obligations.
It seems that rather than interpret the new rules, some large companies such as Tesco Bank, HSBC, Barclays, and GlaxoSmithKiline are applying a risk adverse approach and seemingly moving all off-payroll staff to PAYE. Whether (effectively) banning contractors is the right approach remains to be seen and it is possible many companies may reverse their decision if they struggle to find the skills they need.
To View the newly updated HMRC Factsheet copy the following Link into your web browser:
Monday Jan 13, 2020