Vale & West Chartered Accountants Blog

Businesses unaware of off-payroll rules

Recent research, conducted by the Association of Professional Staffing Companies (APSCo), has found that only 39 per cent of recruitment agencies believe that their clients are aware of the extension of off-payroll rules to the private sector from next April.

Moreover, according to APSCo’s research, only 12 per cent of the agencies polled said that their clients are actively preparing for the updated IR35 legislation, and 10 per cent said that their clients expect to pay more for contractors after the changes come in.

Under the changes to IR35 legislation, medium and large private sector firms will become responsible for setting the tax status of contracted workers, while the tax liability will also transfer from the contractor to the fee-paying party in the supply chain, which will typically be the recruiter or firm that directly engages the individual.

Furthermore, employment businesses will be responsible for deducting income tax and employee’s national insurance contributions (NICs) from fees paid, regardless of whether their client pays its bill.

Under the new rules, employment businesses will also be obliged to have in place a dispute resolution procedure which meets minimum criteria set by Government, to allow for determinations to be challenged and for contractors to exercise their rights to seek written reasons for their status determination directly from the employment business.

However, the IR35 rules will not apply to small businesses which meet two or more of the following criteria, which states that businesses must have an annual turnover of less than £10.2 million, a balance sheet total of less £5.1 million, and/ or less than 50 employees.

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