Contractors are still not fully aware of the changes to tax legislation that are set to take effect in a year’s time, according to a survey from the Recruitment and Employment Confederation (REC).
From 6 April 2017, all individuals engaged by public sector bodies were caught by new legislation. The Intermediaries legislation ensures that individuals, who work through their own company Personal Service Company (PSC), pay employment taxes in a similar way to employees, if they would have been an employee were it not for the PSC.
In May 2018, HMRC published a consultation document, extending the public sector rules to the private sector. The new rules will apply from April 2020 and will require all workers engaged who are PSC or intermediary company, to have their status reviewed.
It is the client’s responsibility to determine a worker’s employment status and deduct tax and national insurance if appropriate.
It is estimated that non-compliance in this area could have reached £1.3 billion by 2023/24. Following the introduction of the public sector rules, it is estimated that £550 million in tax and national insurance has been raised. It can therefore be classed as a success in raising tax and national insurance, from HMRC’s perspective.
Medium and large businesses (annual turnover of more than £10.2 million, a balance sheet of more than £5.1 million and more than 50 employees) will need to review the status of all their workers engaged through their own companies. Small and unincorporated businesses will be exempted from the rules for the time being.
HMRC has developed CEST (Check Employment Status for Tax) service to assist businesses with detailing the status of their workers.
Do you engage workers through a limited company or an intermediary? Is the CEST rule giving you unclear responses?
You have time to consider your position and make adjustments to your engagements with workers, ahead of the new rules being introduced.
Please get in touch with us to see what can be achieved.