Off-payrollworking (IR35) in the private sector – what do the proposals for April 2020mean for Personal Service Companies (contractors)?

One of the biggest discussionpoints for contractors currently is the proposed changes to the off-payrollrules in the private sector (or IR35 as we all know them!).  The changes planned from 6 April 2020, movethe responsibility for operating IR35 away from the contractor’s own company tothe client and any agencies involved. Louise Wood, Managing Director, explains in this note the main changesand provides a quick update on what Prodrill is doing to help you and yourclients prepare.

Whatis IR35?

Briefly, if a worker provideshis or her services through an intermediary that they control (typically apersonal service company) and work in a manner similar to that of an employee,the IR35 rules currently require them to operate a simplified PAYE/NICdeduction on that income.

Whatis changing?

The first thing to say is thatall the tests which determine whether a worker is caught by IR35 (control,personal service, financial risk etc.) aren’t changing so, theoretically, ifyou are correctly operating outside of IR35 now, you won’t be affected by thesechanges.

From April next year, thedecision if IR35 applies will rest with the end user of your services.  If they pay you, they will also be liable forany PAYE/NIC that should be deducted.  Ifa third party, such as Prodrill, pays you, that liability will rest with thethird party.

HMRC expect that this simplechange will mean that many more contractors are caught within IR35 and aretherefore subject to PAYE/NIC deductions at source.

The key point is ensuring thatPAYE/NIC is deducted when, and only when, it is properly due.

Whatis Prodrill doing to prepare?

We are working with ouradvisors to ensure that we are fully up to speed on the technical and practicalaspects of the changes.  We are alreadyin discussions with our mutual clients to help them prepare for the changes.

Prodrill has been activelyworking with companies such as:

QDOS Contractor, who I am suremany are familiar with, and we will continue to liaise with to remain abreastof the changes and how they may affect individual PSC’s. https://www.qdoscontractor.com...

Wehave also retained professional advisory firm Ernst and Young, to a give thecompany guidance on any compliance, contractual, financial and tax implicationsto the business and across our contractual chain. https://www.ey.com/uk/en/servi...

Louise Wood, our MD has been an active member of Oil & Gas UK’s working group, which was set up to respond to the government consultation on behalf of its members. Over the past 18 months the group have been proactive, meeting regularly and responding to the
various government consultation documents. 

The group have now developed and issued a guidance document across OGUK members
which is available for none members to download (subject to a notional charge). We would encourage you to download this guidance, it’s been devised by OGUK members and will no doubt be referred to by many end user clients as part of their strategy. https://oilandgasuk.co.uk/?s=I...

Whatcan you do now if you are a Personnel Service Company (contractor)?

Clearly, if you alreadyoperate IR35 and/or are content with IR35 being operated from next April, thereis nothing you need to do currently however, if you are concerned that you willincorrectly be caught by IR35 next year, you could consider the following:

• Have a chat with your Prodrill contact todiscuss your concerns and how they might be alleviated.

• Review the way in which you provide services tohelp strengthen the case against IR35 applying.

• Talk to your accountant/professional advisorsand or run your working practices through HMRC’s CEST (check employment statusfor tax) tool or consider obtaining an independent IR35 assessment.

• If you expect to be at the same client beyondApril, have a discussion with Prodrill and the client, to see what theirinitial view is but recognise that they may not have even considered theposition in detail yet. Most end user clients have set up internal workingparties and engage with various internal stakeholders to develop the right strategyfor their company.

• Increase your awareness in the changes, becomeinformed, take a proactive approach to the changes, and don’t expect the clientand or your agency to provide all the information to you.

Wantto know more about the changes?

Contact our Managing DirectorLouise Wood who will be only too happy to discuss your concerns.

louise.wood@prodrill-ers.com

+44 (0) 01224 261920

As HMRC finalise the rules inlate summer, we will continue these discussions and share with you how you canminimise the disruption that the changes might cause.

Bulletin1 issued 18 June 2019