Since the reforms for off payroll working were introduced for the public sector, there has been the expectation that this would eventually be introduced to the private sector.
The reforms mean that businesses will become responsible for assessing an individual’s employment status. This helps ensure that two individuals doing the same job will pay the same level of tax and national insurance even if one of them works through their own personal services company. If the engager (employer) determines that an individual is an employee, they must process their pay through the payroll, even if they work through a company.
Many expected the reforms for the private sector to come into effect from April 2019, but the Chancellor has decided to delay the introduction until April 2020 in order to give businesses more time to prepare.
In addition, it was confirmed that the changes would only apply to engagers which are medium and large businesses, which will be a relief for the estimated 1.5 million small businesses that will not have to comply with the changes.
Some believe that these reforms will be very damaging for the private sector. Many businesses cannot afford to take on full time employees and prefer to engage with contractors who provide their services through a company, as and when they require their services. It has been suggested that the changes will result in contractors simply increasing their charges to cover the additional tax and national insurance they are going to suffer. There is also the additional administrative burden of checking whether these rules apply each time an individual is engaged.
Author: Luke Thomas, Director, Plus Accounting
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