Are you affected by the new legislation?
The Finance Bill introduced a simplified test of self-employment. Whilst the new legislation was primarily aimed at intermediaries, the issue of work status is as relevant to employers as it is to payroll companies and agencies. At a meeting with HMRC we were advised that all parties in the supply chain including employers have a responsibility to check the work status of their non-paye workers.
- Do you pay temporary workers directly on a self-employed or sole trader basis?
- Are any of your temporary workers paid through offshore schemes designed to exploit tax “loopholes”?
- Are your direct limited company contractors, inside or outside of IR35 and are the correct contracts in place to clearly define the business relationship to protect your business?
If the answer to any of these questions is 'yes' or 'don’t know' we would strongly recommend you review your temporary workforce arrangements.
Travel and Subsistence
From 6th April 2016, temporary workers will no longer be able to claim travel and subsistence tax relief on home to work commuting where the worker works through an employment intermediary, unless it can be shown that the worker providing the services is not subject to the supervision, direction or control (SDC) of any person. The definition of an employment intermediary includes an employment business, an umbrella company or a personal services company that falls within IR35.
HMRC have decided following the consultation that liability for the unpaid tax and NICs on travel and subsistence expenses will initially rest with the employment intermediary who has the contract with the temporary worker. This liability can be transferred to a client or a relevant person if they provide a fraudulent document to say that SDC does not apply when it does. Liability can also be transferred to the employment business when it can be shown that they failed to obtain evidence that SDC did not apply when it did. Finally, the director or other company officers of either the client of the employment business can be held personally liable.
While HMRC accept that the majority of responses opposed the use of the SDC test due to its ambiguity, they believe that detailed guidance will allay these concerns.
The new legislation is designed to address the problem of workers in some industries being falsely classified as self-employed in order to avoid PAYE tax and employer's National Insurance contributions (NICs).