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With IR35 changes in the offing, we are sharing this set of practical FAQs from ACCA / HMRC

From 6 April 2020, the off-payroll working rules will be extended to medium and large organisations in all sectors.

The organisation receiving an individual’s services will be responsible for determining whether the off-payroll rules apply. If so, the fee-payer will be responsible for tax deductions and national insurance contributions through PAYE.

According to a recent webinar by HMRC, the following questions were answered by HMRC to provide more clarity on off-payroll rules:

  1. Who is the fee-payer?
  2. When do off-payroll rules apply to the private sector?
  3. What is the exact definition of a PSC and how do we determine whether a sub-contractor is a PSC or a genuine trading company?
  4. How does the contractor invoice if still trading through the intermediary ie Personal Service Company (PSC)?
  5. Whose details are used when processing payroll for off-payroll deductions – is it the intermediary or the worker?
  6. Why is the ‘CEST’ tool not reliable – if it is the option provided by HMRC, its use should be ‘conclusive’?
  7. How often should the fee-payer process the FPS (full payment submission) if payments are made to contractors weekly but the fee-payer processes monthly payroll otherwise? Is there any concession available for more frequent payments to contractors?
  8. How often should you be running the CEST tool?
  9. Does an ‘appeal’ against a determination need to be decided on the basis of the facts at the date of the original determination or the date of the appeal?
  10. How to determine the size of the company?
  11. Will HMRC be investigating employees who were previously outside IR35 and then find themselves within IR35 at a later period?
  12. Do I have to provide a Status Determination Status outcome to PSCs who provide infrequent services such as plumbing or decorating, for example?
  13. Where do we stand with consultants who currently live (and work carried out) outside of the UK, but the invoice for payment (made in their local currency) is made to the UK? Would we need to assess these consultants like consultants based in the UK?
  14. Do these rules affect ‘Auto Enrolment’ and holiday pay?
  15. What information must be provided to the worker for status determination and what is the deadline to process SDS?
  16. How will the IR35 rules affect franchises? Would the whole franchise be caught by IR35 or is it on an individual franchisee basis?
  17. What happens if the contractor’s already working through an umbrella that state they are already PAYE? What is the hirer’s obligation in this instance?
  18. Does it apply to the Construction Industry when the contractor recruits smaller subcontractors?
  19. If the client organisation is overseas (within the EU), does this fall within the scope of IR35 rules?
  20. If a consultant provides services to a company and the company determines the consultant is an off payroll worker, should the company deduct the tax at a standard rate or is it still up to consultant to pay the taxes?
  21. How to determine a Non-Executive Director’s status who provides services via their limited company? Do the rules apply to them?
  22. In the case of RALC Consulting Ltd v HMRC, HMRC argued at tribunal that CEST result was irrelevant to determining IR35. Are companies at risk of HMRC arguing the same if they rely on CEST?
  23. How do the affected organisations prepare for off-payroll rules changes?

Download the answers to these questions now

Useful resources:

ACCA webinar- The extension of IR35 to the private sector

HMRC Employment Status Manual

CEST Tool

Article from ACCA In Practice