Press release
29 October 2018
Mark Groom, Employment Tax Partner at Deloitte, comments on the government’s announcement that, from April 2020, large and medium-sized businesses in the private sector will join the public sector in becoming liable for PAYE/NIC on payments made to workers engaged through Personal Service Companies (PSCs). Previously, PSCs were liable if tax rules known as “IR35” applied.
Mark Groom said:
“The government has listened to the concerns of private sector businesses that bringing in IR35 in April 2019 would have been too soon. Given the scale and complexity of the private sector, the extra time will be welcomed. But there’s still a lot to do, and business should start preparing now, to avoid being caught out closer to April 2020.
“Three of the biggest challenges businesses will face are: firstly, determining the correct employment status for any worker; secondly, dealing with disputed status assessments; and finally, implementing significant changes to systems, contracts and commercial negotiations over day rates.
“Some businesses have already started forming their project plans. Those who have not yet done so should not underestimate the work involved to ensure they are ready to go live by April 2020.
“Personal Service Companies still have their place, particularly where individuals are self-employed and IR35 does not apply; in that case, incorporation can provide valuable commercial benefits.”
*The following table shows how the parties would be impacted, at a typical day rate of £500 per day, assuming 210 days worked p.a:
|
Worker with fees £500 per day, or £105,000 p.a. |
Carry on paying the same rate |
Reduce the day rate to keep the engager break-even |
Increase the day rate to keep the worker break-even |
|
Impact on Worker’s net income |
-4% |
-13% |
Nil |
|
Impact on the Engager’s costs |
+13% |
Nil |
+22% |
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