Are you carrying out your pension responsibilities?

The Pensions Regulator (TPR) is reminding all employers of their automatic enrolment (AE) responsibilities as new figures show an increase in penalties issued.

TPR’s quarterly compliance and enforcement bulletin shows a 191.4 per cent rise in unpaid contribution notices (UCNs) – from 352 to 1,026.

There was also a 17 per cent increase in compliance notices (CNs) – from 13,185 to 15,420 – compared with the previous quarter.

UCNs are issued if the regulator believes employers have missed contributions into a workplace pension scheme. The notices give employers a date for paying missed contributions.

Employers receive CN when the regulator thinks they have breached their automatic enrolment duties. The notices outline what the employer needs to do to be compliant, and by when.

The regulator says increase in CNs was partly the result of a 14 per cent increase in employers who reached their declaration, re-declaration or second re-declaration deadline between June and August compared with those who reached their deadline between March and May 2020.

The figures also show how the regulator is continuing to be tough with employers who don’t comply with their duties.

Mel Charles, director of automatic enrolment at TPR, said: “Employers may have seen their business change because of Covid-19, but their pension duties have not.

“While we issued easements at the start of the pandemic, we closely monitored compliance and took action where necessary. We continued to target employers who committed serious breaches and where staff contributions were at immediate risk.

“As predicted, we are seeing a return to normal levels of enforcement activity in line with our expectations, but we will monitor this closely.

“Indications are that the majority of employers are paying their contributions in full and on time and we have not seen any unusual increase in reports of late payments by pension schemes.

“However, employers must remember their pension duties continue and failure to fulfil them may lead to legal action.”

TPR also secured its first confiscation order under the Proceeds of Crime Act 2002 in September when a fraudster who swindled a charity’s pension scheme out of more than £250,000 was told he must pay back the money he stole or face further jail time.

• To discuss any aspects or issues regarding automatic enrolment please contact me on 01772 430000

Living wage to rise next year

The National Living wage will rise by 2.2 per cent, or a minimum of £345, to £8.91 an hour from next April, the chancellor Rishi Sunak has announced.

He also revealed that 23 and 24-year olds will qualify for the living wage for first time.

Other pay rates were also increased. From next April, 16 and 17-year-olds will see their pay go up to £4.62 per hour, from today’s level of £4.55.

The announcements came as the chancellor set out what the government will spend on health, education, transport and other public services next year.

In his Spending Review statement to MPs he spoke about the state of the UK economy and the impact Covid-19 has had.

Mr Sunak also announced the creation of a new UK infrastructure bank, to be headquartered in the north of England.

He told MPs the bank will finance “major new infrastructure projects” from next spring, alongside the private sector. It forms part of the government’s new infrastructure strategy.

The chancellor unveiled a “levelling up” fund worth £4bn which will invest in local infrastructure that has a visible impact on people and their communities and will support economic recovery. Projects must have local support, he added.

The review also includes a £4.6bn package to help people back to work, with £2.6bn for a Restart scheme to support those out of work for 12 months and £1.6bn for the Kickstart scheme to subsidise jobs for young people.

The chancellor also announced that the business rates multiplier will be frozen in 2021-22, a move the government says will save businesses in England £575m over the next five years.

The statement spelled out the impact of Covid-19 on the economy, which is set to contract by 11.3 per cent in 2020, the largest fall for over 300 years. Mr Sunak said: “The economic damage is likely to be lasting.”

The economy is forecast to grow by 5.5 per cent next year and by 6.6 per cent in 2022, however output is not expected to return to pre-crisis levels until the fourth quarter of 2022.

Unemployment is expected to hit 7.5 per cent in spring next year, with 2.6 million people jobless.

The chancellor said there would be an extra £3bn next year to support those who are unemployed but he warned “we cannot protect every job”.

Borrowing is set to hit £394bn this year, equivalent to 19 per cent of GDP and the highest ever level in peacetime.

MPs were also told that by 2025, the economy will be around three per cent smaller than was expected in March’s Budget forecast.

Setting out the budgets for government departments and the devolved administrations’ block grants for 2021/21, Mr Sunak said: “Our health emergency is not yet over, and the economic emergency has only just begun; so, our immediate priority is to protect people’s lives and livelihoods.

“But today’s Spending Review also delivers stronger public services – paying for new hospitals, better schools and safer streets. And it delivers a once-in-a-generation investment in infrastructure. Creating jobs, growing the economy, and increasing pride in the places people call home.”

VAT deferral: New payment scheme announced

Businesses and sole traders that deferred their VAT earlier this year as they battled the Covid-19 pandemic will no longer have to pay a lump sum at the end of March 2021.

The deferral is part of a package of measures taken by the government to support the economy during the ongoing crisis and its impact on businesses.

The Chancellor has now announced that those who deferred VAT due from March 20 to June 30 this year will have the option to pay in smaller payments over a longer period of time.

Instead of paying the full amount by the end of March 2021, they can make smaller payments up to the end of March 2022, interest free.

That means they will be able to spread payment over the financial year 2021-22, in 11 equal instalments

They will need to opt-in to the scheme, and for those who do, it means that their VAT liabilities due for that March-June 2020 period do not need to be paid in full until the end of March 2022.

Those that can pay their deferred VAT can still do so by March 31, 2021. More information will be available from HMRC in the coming months.

Businesses and sole traders that cancelled their Direct Debit to HMRC to take advantage of the deferral will need to set up a new arrangement in time for the first payment after June 30.

Payments due after June 30 must be paid in full as normal and you must continue to file your VAT return on time.

You can pay or make payments towards your deferred VAT now or at any time up to March 31, 2021.

If you need more help to pay your VAT, you may be eligible to get support with your tax affairs through HMRC’s ‘Time To Pay’ service. This allows you to pay off your debt by instalments over a period of time.

More information is available here: https://www.gov.uk/difficulties-paying-hmrc

WNJ is also here to help and support our clients on any aspect of VAT or other tax issues. Please get in touch on 01772 430000.

EU deadline approaches – are you prepared?

As the deadline ticks down to the end of the EU transition period on December 31 businesses are being urged to make sure they are prepared – deal or no deal.

In a bid to ensure as many businesses as possible are ready for the changes, the government has launched an information campaign, involving TV adverts and posters, which proclaim: ‘The UK’s new start: let’s get going’.

The campaign includes a “checker tool” at gov.uk/transition which the government says quickly identifies the necessary next steps needed.

As the deadline approaches, HMRC is stressing that businesses will need an EORI number to move goods between the UK and EU countries from January 1 next year. They may also need one if they move goods to or from Northern Ireland.

Without an EORI businesses may face increased costs and delays. For example, if HMRC cannot clear the goods companies may have to pay storage fees.

The message is, if you haven’t got one already, apply for an EORI number “as soon as possible”.

Businesses will not usually need an EORI number if they only:

• provide services
• move goods between Northern Ireland and Ireland

If you use a post or parcel company, they’ll tell you if you need an EORI number.

You will need an EORI number from an EU country if your business will be making declarations or getting a customs decision in the EU.

Businesses can get this from the customs authority in the EU country where they submit their first declaration or request their first decision.

HMRC says that if you move goods to or from Northern Ireland, from January 1 you’ll need an EORI number that starts with XI to:

• move goods between Northern Ireland and non-EU countries
• make a declaration in Northern Ireland
• get a customs decision in Northern Ireland

To get an EORI number that starts with XI, you must already have an EORI number that starts with GB. If you do not have one, the advice is to apply as soon as possible.

If you do already have an EORI number that starts with GB and HMRC thinks you need one that starts with XI, they say they will automatically send you one in mid-December.

To get advice on moving goods between Great Britain and Northern Ireland sign up for the Trader Support Service (https://www.gov.uk/guidance/trader-support-service)

If you sign up before November 23, this will also ensure you’ll be sent an EORI starting with XI.

If you already have an EORI, from January 1, you’ll need a number that starts with GB to move goods between Great Britain and other countries.

To apply you need your:

• VAT number and effective date of registration – these are on your VAT registration certificate
• National Insurance number – if you’re an individual or a sole trader
• Unique Taxpayer Reference (UTR) – find your UTR if you do not know it
• business start date and Standard Industrial Classification (SIC) code – these are in the Companies House register
• Government Gateway user ID and password

As the transition period ends, businesses will also have to watch the VAT implications – unlike customs duties and rules, rates vary across Europe.

And they will need to ensure products they ship still conform with the safety, security and health requirements of the market they are in.
For more details visit https://www.gov.uk/eori

WNJ is also here to help you on any issues relating to the end of the transition period, please contact us on 01772 43000.

Furlough scheme extended to Spring next year

Chancellor Rishi Sunak has announced that the furlough scheme will be extended into Spring next year.

The Coronavirus Job Retention Scheme (CJRS) will now run until the end of March 2021, with employees receiving 80 per cent of their current salary for hours not worked.

Similarly, support for millions more workers through the Self-Employment Income Support Scheme (SEISS) will be increased, with the third grant covering November to January calculated at 80 per cent of average trading profits, up to a maximum of £7,500.

Under the CJRS scheme, employers will only be asked to cover National Insurance and employer pension contributions for hours not worked.

For an average claim, this accounts for just five per cent of total employment costs, or £70 per employee per month.

The government says that the CJRS extension will be reviewed in January to examine whether the economic circumstances are improving enough for employers to be asked to increase contributions.

The extension follows the start of a second month-long national lockdown in England which is set to end on December 2. It has been imposed in an effort to cut the rate of Covid-19 infections.

Announcing this latest CJRS extension, Mr Sunak said: “I’ve always said I would do whatever it takes to protect jobs and livelihoods across the UK – and that has meant adapting our support as the path of the virus has changed.

“It’s clear the economic effects are much longer lasting for businesses than the duration of any restrictions, which is why we have decided to go further with our support.

“Extending furlough and increasing our support for the self-employed will protect millions of jobs and give people and businesses the certainty they need over what will be a difficult winter.”

Businesses will have flexibility to use the scheme for employees for any amount of time and shift pattern, including furloughing them full-time.

The extended CJRS will operate as the previous scheme did, with businesses being able to claim either shortly before, during or after running payroll. Claims can be made from 8am Wednesday November 11. Claims made for November must be submitted to HMRC by no-later than December 14.

Claims relating to each subsequent month should be submitted by day 14 of the following month, to ensure prompt claims following the end of the month which is the subject of the claim.

Neither the employer nor the employee needs to have previously claimed or have been claimed for under CJRS to make a claim under the extended scheme – if other eligibility criteria are met.

An employer can claim for employees who were employed and on their PAYE payroll on October 30, 2020. The employer must have made a PAYE Real Time Information (RTI) submission to HMRC between March 20, 2020 and October 30, 2020, notifying a payment of earnings for that employee.

Employees that were employed and on the payroll on September 23, 2020 (the day before the Job Support Scheme announcement) who were made redundant or stopped working afterwards can be re-employed and claimed for.

The employer must have made an RTI submission to HMRC from March 20, 2020 to September 23, 2020, notifying a payment of earnings for those employees.

The government has also announced:

• cash grants of up to £3,000 per month for businesses which are closed worth more than £1 billion every month
• £1.1 billion is being given to local authorities, distributed on the basis of £20 per head, for one-off payments to enable them to support businesses more broadly
• plans to extend existing government-backed loan schemes and the Future Fund to the end of January, and an ability to top-up Bounce Back Loans
• an extension to the mortgage payment holiday for homeowners
• up to £500 million of funding for councils to support the local public health response

The new Job Support Scheme (JSS), which was scheduled to start on November 1, has been postponed.

Increased support for the self-employed

The government is increasing its support to the self-employed over the coming months with people also getting paid faster than previously planned.

It has revealed details of an enhanced Self-Employed Income Support Scheme (SEISS) as part of its package to support the economy as England heads into a second, month-long lockdown.

Under this third instalment of the scheme, people will receive 80 per cent of average trading profits for November.

Grants will also be paid faster than previously planned – with the claims window opening on November 30 rather than the middle of December.

As SEISS grants are calculated over three months, the uplift for November to 80 per cent, along with the 40 per cent level of trading profits for December and January, increases the total level of the third grant to 55 per cent of trading profits. The maximum grant will increase to £5,160.

The extension aims to deliver “critical support” to the self-employed in the form of two grants, each available for three-month periods covering November 2020 to January 2021 and February 2021 to April 2021.

To be eligible for the grant extension self-employed individuals, including members of partnerships, must:

• have been previously eligible for the SEISS first and second grant – although they do not have to have claimed them
• declare that they intend to continue to trade and either:
• are currently actively trading but are impacted by reduced demand due to coronavirus
• were previously trading but are temporarily unable to do so due to coronavirus

The grants will be paid in two lump sum instalments each covering a three-month period.

The first will cover the period from November 1 until January 31. The government will provide a taxable grant covering 55 per cent of average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £5,160 in total.

The second grant will cover a three-month period from February 1, 2021 until April 30, 2021. The government says it will review the level of the second grant and set this in due course.

The grants are taxable income and also subject to National Insurance contributions.

The online service for the next grant will be available from November 30. HMRC will provide full details about claiming and applications in due course.

The government says the move means it is providing broadly the same level of support for the self-employed as it is for employees through the Coronavirus Job Retention Scheme in November and then the Job Support scheme in December and January.

More businesses will also be able to benefit from government loan schemes which have been extended to the end of January, while firms can ‘top up’ existing Bounce Back Loans should they need additional finance.

Announcing the moves, Chancellor Rishi Sunak said: “The rapidly changing health picture has meant we have had to act in order to protect people’s lives and I know this is incredibly worrying time for the self-employed.

“That is why we have increased the generosity of the third grant, ensuring those who cannot trade or are facing decreased demand are able to get through the months ahead.”

Furlough scheme is extended

The Coronavirus Job Retention Scheme (CJRS) has been extended for a month until December as a new national lockdown is set to come into force in England later this week.

Employees will receive 80 per cent of their current salary for hours not worked, up to a maximum of £2,500.

Businesses will have flexibility to bring furloughed employees back to work on a part time basis or furlough them full-time.

They will only be asked to cover National Insurance and employer pension contributions which, for the average claim, accounts for just five per cent of total employment costs.

This extended furlough scheme will operate as the previous scheme did, with businesses being paid upfront to cover wages costs.

There will be a short period when the Treasury will need to change the legal terms of the scheme and update the system and businesses will be paid in arrears for that period.

The new Job Support Scheme (JSS), which was scheduled to start on November 1, has been postponed until the furlough scheme ends.

Here at WNJ we are awaiting clarification on the intricacies of the furlough extension and we are here for all our clients during this next month and beyond.

Announcing the extension, following the decision to place England in lockdown for one month from Thursday this week, Chancellor Rishi Sunak also revealed further economic support to help businesses and individuals.

Business premises forced to close in England are to receive grants worth up to £3,000 per month under the Local Restrictions Support Grant. They will be eligible for the following:

• For properties with a rateable value of £15,000 or under, grants to be £1,334 per month, or £667 per two weeks
• For properties with a rateable value of between £15,000-£51,000 grants to be £2,000 per month, or £1,000 per two weeks
• For properties with a rateable value of £51,000 or over grants to be £3,000 per month, or £1,500 per two weeks

It has also been announced that £1.1bn is being given to local authorities, distributed on the basis of £20 per head, for one-off payments to enable them to support businesses more broadly.

The government has also extended its ‘mortgage holiday’ for homeowners, which was also set to end at the beginning of November.

Announcing the moves, Chancellor Rishi Sunak said: “Over the past eight months of this crisis we have helped millions of people to continue to provide for their families. But now – along with many other countries around the world – we face a tough winter ahead.

“I have always said that we will do whatever it takes as the situation evolves. Now, as restrictions get tougher, we are taking steps to provide further financial support to protect jobs and businesses. These changes will provide a vital safety net for people across the UK.”

How it works

Employers small or large, charitable or non-profit, are eligible for the extended CJRS.

All employers with a UK bank account and UK PAYE schemes can claim the grant. Neither the employer nor the employee needs to have previously used the CJRS.

To be eligible to be claimed for under this extension, employees must be on an employer’s PAYE payroll by 23:59 on October 30, 2020.

This means a Real Time Information (RTI) submission notifying payment for that employee to HMRC must have been made on or before that date.

As under the current CJRS rules employees can be on any type of contract. Employers will be able to agree any working arrangements with employees.

Employers can claim the grant for the hours their employees are not working, calculated by reference to their usual hours worked in a claim period. Such calculations will broadly follow the same methodology as currently under the CJRS.

When claiming the CJRS grant for furloughed hours, employers will need to report and claim for a minimum period of seven consecutive calendar days.

Employers will need to report hours worked and the usual hours an employee would be expected to work in a claim period.

For worked hours, employees will be paid by their employer subject to their employment contract and employers will be responsible for paying the tax and NICs due on those amounts.

What support is being provided and employer costs

For hours not worked by the employee, the government will pay 80 percent of wages up to a cap of £2,500. Under the current CJRS, this cap is reduced pro-rata, dependant on the hours worked by the employee. The grant must be paid to the employee in full.

Employers will pay employer NICs and pension contributions, and should continue to pay the employee for hours worked in the normal way.

As with the current CJRS, employers are still able to choose to top up employee wages above the scheme grant at their own expense if they wish.

The government will confirm shortly when claims can first be made in respect of employee wage costs during November, but there will be no gap in eligibility for support between the previously announced end-date of CJRS and this extension.

What the latest lockdown means

England’s new national lockdown will start on Thursday November 5 and will be in place until Wednesday December 2.

To reduce social contact as it looks to reduce the spread of Covid-19, the government has ordered certain businesses and venues to close.

These include:

• all non-essential retail, including, but not limited to clothing and electronics stores, vehicle showrooms, travel agents, betting shops, auction houses, tailors, car washes, tobacco and vape shops.
• indoor and outdoor leisure facilities such as bowling alleys, leisure centres and gyms, sports facilities including swimming pools, golf courses and driving ranges, dance studios, stables and riding centres, soft play facilities, climbing walls and climbing centres, archery and shooting ranges, water and theme parks
• entertainment venues such as theatres, concert halls, cinemas, museums and galleries, casinos, adult gaming centres and arcades, bingo halls, bowling alleys, concert halls, zoos and other animal attractions, botanical gardens
• personal care facilities such as hair, beauty and nail salons, tattoo parlours, spas, massage parlours, body and skin piercing services, non-medical acupuncture, and tanning salons

Food shops, supermarkets, garden centres and certain other retailers providing essential goods and services can remain open.

Essential retail should follow Covid-secure guidelines to protect customers, visitors and workers.

Non-essential retail can remain open for delivery to customers and click-and-collect.

Hospitality venues like restaurants, bars and pubs must close, but can still provide takeaway and delivery services. However, takeaway of alcohol will not be allowed.

Hotels, hostels and other accommodation should only open for those who have to travel for work purposes and for a limited number of other exemptions which will be set out in law.

To help contain the virus, everyone who can work effectively from home must do so.

Where people cannot do so – for instance people who work in critical national infrastructure, construction or manufacturing – they should continue to travel to work/attend their workplace.

A Self Assessment reminder

HM Revenue and Customs has issued a reminder that there are now less than 100 days left to complete a Self-Assessment tax return online before the January 31 deadline.

You can complete your 2019 to 2020 tax return at any time up to the deadline but completing it early allows time to pay or set up a payment plan.

The majority of people choose to complete the return online, which provides an immediate calculation of any tax owed.

The deadline for competing a paper tax return and sending it to the taxman was October 31.

The HMRC has also issued a reminder that people must complete a return if they:

• have earned more than £2,500 from renting out property
• have received, or their partner has received, Child Benefit and either of them had an annual income of more than £50,000
• have received more than £2,500 in other untaxed income, for example from tips or commission
• are a self-employed sole trader whose annual turnover is over £1,000
• are an employee claiming expenses in excess of £2,500
• have an annual income of over £100,000
• have earned income from abroad that they need to pay tax on

Around 11 million people complete the tax return every year.

HMRC’s Interim Director General of Customer Services, Karl Khan, said: “The vast majority complete their tax return by the January 31 deadline, but you don’t need to wait until January; you can send it back now and get it out of the way.

“HMRC is determined to help customers during this difficult time. We know many customers will have been adversely affected by the coronavirus pandemic, or will need help to spread the cost of their tax bill.

“That’s why we’ve made it quick and simple to set up a payment plan to spread the costs and help people get back on their feet. It’s easy to do online and there’s no need to call us to set it up.”

Once people have completed their 2019 to 2020 tax return, and know how much tax is owed, they can set up their own payment plan to help spread the cost of their liabilities, up to the value of £30,000.

They can also use the self-serve ‘Time to Pay’ facility to set up monthly direct debits and this can all be done online.

The taxman is also warning people to be aware of copycat HMRC websites and phishing scams.

And be alert if someone calls, emails or texts claiming to be from HMRC, saying that you can claim financial help, are due a tax refund or owe tax. It might be a scam. Check GOV.UK for how to a recognise genuine HMRC contact.

If you are completing a tax return for the first time, you will need to register for Self Assessment.

If your Self Assessment debts are over £30,000, or you need longer than 12 months to pay your debt in full, you may still be able to set up a Time to Pay arrangement.

Customers using self-serve Time to Pay will be required to pay any interest on the tax owed. Interest will be applied to any outstanding balance from February 1 2021.

Limited company directors who are currently in Self Assessment but no longer meet any other criteria to remain in scope, can either:

• complete their tax return by the deadline. HMRC will update their record and they won’t be issued a notice to file for the following year
• call HMRC, which can agree to withdraw the notice, if the customer no longer satisfies the criteria for this year

Also, From April 6 2020 the process for Capital Gains Tax on UK residential property sold since that date has changed.

It must now be declared and paid within 30 days of completion. This only applies where the property in question is not the seller’s main home.

• To discuss any tax matters please contact me on 01772 430000

One-year Spending Review looks to tackle Covid crisis

Chancellor Rishi Sunak will conduct a one-year Spending Review in late November to priorities the government’s response to Covid-19 and focus on supporting jobs.

The Treasury has announced that the review will take place on November 25. It replaces long-term Comprehensive Spending Review that was planned.

It said it was “the right thing” at the moment to “focus entirely” on protecting jobs and responding to the crisis.

The change comes as economic experts warn that the UK is at risk of a double-dip recessions.

The Covid crisis had already led to the scrapping of the Autumn Budget in favour of the long-term review.

The new review will now settle government departments’ resource and capital budgets for 2021-22, and the devolved administrations’ block grants for the same period.

Multi-year NHS and schools’ resource settlements will be fully funded, as will priority infrastructure projects.

The government says the review will build on business support measures that have already been introduced and will focus on three areas:

• Providing departments with the certainty they need to tackle Covid-19 and deliver a ‘Plan for Jobs’ to support employment
• Giving public services enhanced support to continue to fight against the virus alongside delivering frontline services
• Investing in infrastructure to deliver plans to “unite and level up the country”, drive economic recovery and “Build Back Better”

Announcing the move the chancellor said: “In the current environment its essential that we provide certainty.

“So, we’ll be doing that for departments and all of the nations of the United Kingdom by setting budgets for next year, with a total focus on tackling Covid and delivering our Plan for Jobs.

“Long term investment in our country’s future is the right thing to do, especially in areas which are the cornerstone of our society like the NHS, schools and infrastructure.

“We’ll make sure these areas crucial to our economic recovery have their budgets set for further years so they can plan and help us Build Back Better.”

Get prepared for IR35 changes

Businesses are being urged to prepare for changes to off-payroll working rules that will come into effect next April.

In an information note last month, HMRC pointed out that the government remained committed to introduce the policy.

The changes to IR35 were originally set to take effect this April, but the start date was delayed a year as a result of the coronavirus pandemic.

In its note HMRC said: “This is a deferral of the introduction of the reforms, not a cancellation.

“The government remains committed to introducing this policy to ensure that people working like employees, but through their own limited company, pay broadly the same tax as individuals who are employed directly.”

Final technical guidance on the changes to IR35 has also been published.

The taxman says the off-payroll working rules are designed to ensure individuals working like employees, but through their own limited company (often known as a ‘personal service company’ or ‘PSC’), or other intermediary, pay broadly the same Income Tax and National Insurance contributions (NICs) as individuals who are directly employed.

HMRC says it will focus on ensuring compliance with the new rules, rather than investigating past arrangements.

It will not open a new compliance enquiry into a contractor’s return for tax years before April 6, 2021 in circumstances where:

• a client decides that a contract is within the off-payroll working rules (IR35)
• a contractor changes the way they work from providing and invoicing services through an intermediary entity to now being paid via a client or end user’s payroll
• a contractor ends a contract because they disagree with a client decision on status

This includes any decisions that clients may have already made to prepare for the April 2020 changes, which have now been delayed.

HMRC says the only reason it will open an enquiry using information acquired through the off-payroll working rules changes is if there is reason to suspect fraud or criminal behaviour.

What the changes mean

If you contract for a medium or large-sized non-public sector organisation

From 6 April 2021, your client will be responsible for deciding your employment status for tax for the services you provide them. They should provide you with a ‘Status Determination Statement’ if the rules apply, setting out and explaining their decision.

If your client determines that your contract is inside the off-payroll working rules and so you are a deemed employee for tax purposes then your client, or the agency who pays your fees, will also be responsible for deducting Income Tax and NICs before they pay you.

You will still need to submit a tax return, but relief is available on the tax already paid.

For the tax year 2020 to 2021, your limited company or other intermediary will remain responsible for operating the off-payroll working rules and accounting for and paying the relevant Income Tax and NICs.

If you contract for a public authority

Your client is already responsible for determining your employment status for tax and they will continue to be responsible. Now they will need to provide you with a ‘Status Determination Statement’ setting out their decision about whether the off-payroll working rules apply.

If you contract for a small non-public sector organisation

You limited company or other intermediary will remain responsible for determining whether your contract is inside the off-payroll working rules, and accounting for and paying the relevant Income Tax and NICs.

If you are not sure if your client is small, you have the right to request information from them about the size of their organisation.

Clients cannot apply a blanket status assessment across all contractors

Your client must take reasonable care when making a decision about whether the off-payroll working rules apply.

Applying a decision to a group of off-payroll workers with the same role, working practices and contractual terms may be permissible in some circumstances, but it is not right to rule all engagements to be inside or outside of the rules irrespective of the contractual terms and actual working arrangements.

It is natural that businesses will consider whether limited companies or other intermediaries are the best way to engage you, and other contractors, if you are working like employees. This is a business decision for organisations to make, and organisations will be free to decide how they engage their workers.

Some organisations might decide to move you onto an employment contract or engage you through an agency rather than directly, while other organisations may choose to continue engaging you through your own limited company where this suits their business model.

Continuing to work through a limited company

These changes do not affect whether you can work through your own limited company, generally known as a ‘personal service company’, or ‘PSC’. This will still be possible after 6 April 2021, however the way the Income Tax and NICs are calculated and paid may change for some contractors, or some clients may change the way they wish to engage you and other contractors.

Contractors are not all self-employed

Your employment status, whether you are employed or self-employed, is not a matter of choice. It depends upon the terms and conditions of a particular engagement and your actual working practices. The fact that you supply your services through your own limited company is not necessarily relevant to whether you are employed or self-employed.

The off-payroll working rules will only apply to individuals who are working like employees under the current employment status tests, and do not apply to the self-employed.

For example, if you work predominantly for the same client, at their premises and following their policies and procedures, you cannot send a substitute to work on your behalf and would require permission to seek additional work elsewhere then you are more likely to resemble an employee.

• To discuss any issues relating to IR35 and the changes, please contact me on 01772 430000