After a delay of 12 months, April 2021 sees the extension of the off payroll working rules to private sector companies. For some, the approaching deadline has been overlooked in the chaos of dealing with Covid 19, but there seems no likelihood that it will be deferred again despite the present lockdown.
The IR35 rules for intermediaries have been in place for many years and will be familiar to many, particularly contractors. Under these rules the intermediary, usually a personal service company (PSC), has to decide whether the rules apply to their circumstances for each contract they enter into. If they do apply, the income from the contract is effectively subject to PAYE (although the consequences are not as simple as that sounds). The key to the new off payroll legislation is to make the same status decision as you do under the current IR35 rules.
HMRC have created an online tool to help with status decisions; the CEST tool, which can be accessed here. Whilst it is sensible to use the CEST tool when making the status decision, great care is needed in how the questions in the tool are answered. Some of the questions are not well worded and the tool does not always give you the right answer. HMRC have upgraded the tool in preparation for off payroll working but it remains less than foolproof.
It is essential that you take time to understand your responsibilities and establish the necessary paperwork and systems required. Further information can be found on HMRC website here.
Andrew Law is an author for accountingcpd. To see his courses, click here.
You need to sign in or register before you can add a contribution.