New Rule On Assessing Worker’s Tax In Public & Private Sector Organisations

In recent months, the government has announced the introduction of a new rule concerning worker’s tax for off-payroll workers. Though this will be a first for those in the private sector, the regulation – which is known as I35 – already applies to the public sector.

Essentially, the rule forces public and private sector employers to take “reasonable care” concerning the tax status of workers who are not on the company’s payroll. It is set to come fully into effect from April 2020.


“Reasonable Care”

Back in March, the government officially announced the pending introduction of a new rule concerning worker’s tax. The dictate, known as IR35, was slated to come into effect from April 2020.

Though many within the private sector have urged delays, there is now less than a year until this new law will be applied to medium and large businesses for the first time.


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The law dictates that employers within the public and private sectors will soon have to take “reasonable care” that their workers’ tax statuses have been properly assessed, meaning that where I35 applies, it will be down to them to deduct income tax and National Insurance contributions (NICs) via PAYE. In addition, they will also need to pay employer NICs.

Given that almost a quarter of the UK’s workforce now works on a contingent basis, in the capacity of either a contractor or consultant, this could have far-reaching and drastic consequences.


A Shift In Power

On paper, this doesn’t immediately strike the layman as a significant move on the part of the government, but it will do far more than just create a little extra admin for employers. The new rule is likely to effect a shift in power between employer and off-payroll employee.

As a result, businesses fear that requests for pay rises and more permanent full-time employment are likely to increase, hence the private sector's desire for the government to delay I35 and give them more time to prepare for its introduction.

What has essentially happened is that the obligation to determine tax status has shifted from the worker to the fee payer. Above considerations aside, this also means that new processes will need to be introduced, with a recent consultation document suggesting that employers must be able to provide reasons for their I35 decisions.

The guidance provided by HMRC explains: “[Employers must do] everything you can to make sure the… documents you send to HMRC are accurate.”

Struggling to understand these changes and how they might impact your business? Then get in touch with eSlip today. Experts in HR payroll outsourcing and outsourced payroll services, we could be the solution you’re searching for.


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