A review of the controversial off payroll working rules had been trailed by the current UK Government, but the proposed abolition of the tax regime introduced in 2017 (for the public sector) and 2021 (for the private sector) which was announced in the Mini-Budget took most by surprise.
There will be an element of frustration from businesses who invested in meeting the heavy compliance burden which the off payroll working rules brought over the last few years. There will be yet further work required to unpick arrangements.
When will the off payroll working rules cease to apply?
It is proposed by the government that the off payroll working rules will cease to apply from 6 April 2023, subject to passage of the Finance Bill.
What will it mean for my business?
End user clients who fell within the off payroll worker regime will no longer require to assess employment status for tax purposes of those workers who provide services through their personal service companies. Instead, the previous regime will apply under which the worker/personal service company requires to assess status and apply IR35 rules to the relevant income. This is the regime which currently applies to small and medium entities as they are not caught by the off payroll worker regime.
If you are an off payroll worker providing your services through a personal services company/intermediary, you will now need to consider the impact of the IR35 legislation and your personal services company/intermediary will potentially require to account for payroll taxes.
What should end user clients do now?
You may have adopted hiring policies/decisions to comply with the off payroll working regime. Now would be the time to revisit those to determine the optimum structure for engaging workers and be ready to implement it from April 2023. In the meantime, you may receive requests from individuals who wish to revert to contractor status from April 2023. Requests of this nature will need to be considered carefully given the potential risks for the business including in relation to the criminal offences around failing to prevent facilitation of tax evasion and individuals using a period of employment with you to later argue that they have continued to enjoy the rights and protections afforded to workers or employees.
Arrangements which you have with intermediaries/employment businesses may need to be revisited/renegotiated in advance of April to align with the new (old!) regime.
You may also have reviewed contracts of engagement with off-payroll workers to reflect the post April 2023 regime. Areas which require to be amended in light of the Mini-Budget changes should be identified and amended prior to April 2023.