The rules will apply to private-sector companies and specifically targets the use of contractors (deemed employees) that are employed via ‘Personal Service Companies’ (PSCs).
The rules will apply to all companies (including small subsidiaries of larger Groups) where at least two of the following criteria are met:
- Annual Group turnover of £10.2m;
- A Group balance sheet of £5.1m; and
- Over 50 group employees on an average, full-time equivalent basis.
Robert Salter, an employment and expatriate tax specialist at Blick Rothenberg said, “Given the importance of freelance and contract employees to many modern businesses, impacted companies need to start addressing this issue without delay. In particular, companies need to:
- Understand their ‘off-payroll’ population and understand who will be impacted by these changes;
- Clarify which ‘off-payroll’ employees could be expected to remain active with the company beyond April 2020 and start assessing the needs of the business in this regard – e.g. which deemed employees are ‘must have/key retain’ employees; and
- Start discussing this issue with impacted individuals on a timely basis – i.e. covering issues such as costs, pay, potential employment status etc.
Companies also need to ensure that there processes and budgets are reviewed and amended to recognize the impact of these changes. For example, payroll, finance and HR staff will need to be trained on the new regulations and understand when they could apply, whilst it will be important to ensure that full records are kept vis-à-vis those individuals involved in off-payroll working and held not to be employees. Additionally, companies need to realize that working patterns for contractors or freelancers often change and so systems will need to be in place to ensure that individuals working on an off-payroll basis don’t subsequently become deemed employees (or at least ensure that any transition to deemed employee status is captured on a timely basis for PAYE and NIC purposes).”
Robert added, “These changes represent a substantial change to the UK employee/employer model for affected companies and businesses need to ensure that they have a clear project plan to review and manage this whole change.”
For more information, please contact Robert Salter.