The government have now passed the tax and national insurance changes that will impact on those supplying their services through personal service companies with effect from April 2020.

End users will now be required to determine whether the rules apply to the services provided by the worker via his or her personal service company. This will be a significant additional administrative burden on the large and medium-sized businesses who will be required to operate the new rules. HMRC’s current CEST (Check Employment Status for Tax) online tool has been improved to assist with this change

There is no change for “Small” Employers

“Small” businesses will be outside of the new obligations and services supplied to such organisations will continue to be dealt with under the current IR35 rules with the worker and his or her personal service company effectively self-assessing whether the rules apply to that particular engagement.

The definition of “small” has been widely awaited and the Government have confirmed that it intends to use the existing Companies Act 2006 definition. That is where the business satisfies 2 or more of the following features:

The new obligations are to determine whether the rules apply, deduct tax and national insurance, and report payments under RTI.

They will apply to the agency or intermediary making payments to the personal service company where the end user is large or medium-sized. 

There will be an obligation to pass details of the status determination up and down the labour supply chain. 

The liability for tax and national insurance will be the responsibility of the entity paying the personal service company, however if HMRC are unable to collect the tax from that entity the liability will pass up the labour supply chain thus encouraging those entities further up the supply chain to carry out due diligence to police compliance. 

Please contact us if you would like to discuss how the proposed changes are likely to impact on your business.