From April 2020 the rules for engaging individuals through personal service companies are changing. The responsibility for determining whether the off-payroll working rules (sometimes known as IR35) apply will move to the organisation receiving an individual’s services.
Until the 6th April 2020, the rules governing IR35 will only apply to the public sector. From this date, the rules will also apply to the private sector, including charities. Organisations will be required to meet 2 out of the following 3 conditions:
- An annual turnover of more than £10.2 million.
- A balance sheet of more than £5.1 million.
- .More than 50 employees.
Once the conditions are met, the organisation becomes responsible for determining employee status for individuals described as sub-contractors. This will assist them in deciding whether IR35 applies. Following this assessment the organisation will need to notify the affected individual and/or agency of the assessment result. If the sub-contractor is considered to be a worker, the organisation will be responsible for the tax and national insurance contributions.
Where the sub- contractor disagrees, the organisation will need to review the reasons why they disagree and decide whether there is cause to amend the original decision. The organisation is then required to provide a detailed response to the individual affected within 45 days and also keep a record of the decision.
Once classed a worker, this may open up a floodgate for workers claiming for their rights, such as holiday pay.
It is important for organisations in the private sector to start preparing for the upcoming changes. It is important to note that the matter of employment status is always assessed on a case by case basis. It is advisable for assessment to be carried out prior to the 6th April 2020, to ensure compliance on and after the relevant date.
Credits: Paida Dube, Employment Solicitor - DavidsonMorris