Business

PAYE pain for 2020?

New legislation around PAYE comes into effect on April 6 next
New legislation around PAYE comes into effect on April 6 next New legislation around PAYE comes into effect on April 6 next

IN midst of the Christmas rush I'm sure many of us have turned our minds to the details on our wage slips. And in 2020 many employers will need to do the same

As draft legislation has been published changing the operation of IR35 for medium or large private sector businesses, which shifts the liability and burden of operating PAYE. This new legislation will have effect in relation to contractual payments made on or after April 6 next year.

As with the earlier changes to the operation of IR35 in the public sector, the effect is to shift the burden of assessing whether the legislation applies (and operating PAYE where it does) away from the personal service company.

All parties to labour supply chains (and in particular public sector and medium and large private sector end-clients) will need to be aware of their obligations under the legislation, especially in light of the new mechanisms shifting the liability for operating PAYE to other parties in the labour supply chain.

Wherever you sit in the labour supply chain, the onus is now on you as the employer to take action to ensure the burden and risk of operating PAYE on any payments under payroll arrangements (and the risk of penalties and interest for non-compliance) is shifted down the contractual chain. Contract review in your labour supply chain is essential and amendments may need to be made to include protections and information flow obligations.

The end-client is required to provide a statement of its conclusion as to whether the arrangements constitute disguised employment (i.e. if the contractual relationship with the worker was direct, would the arrangement constitute employment for income tax purposes?) and explain the reasons for the decision. This decision should be passed to the worker and the person or organisation the end-client contracts with.

Businesses should not make blanket decisions in respect of all of their off payroll arrangements and are required to exercise reasonable care in reaching their conclusions.

What can be done now to best address this? First, you should check whether you are of a sufficient size as a business to have to make changes. It would be beneficial to carry out an audit to ensure that: 'status determination statements' are provided (and the initial burden of liability is shifted).

The initial burden as the 'deemed employer' and responsible for operating PAYE in respect of the off-payroll arrangements will fall on the end client business, unless and until the end-client business provides the worker with a 'status determination statement'.

It is also advisable to establish an employment status disagreement process suitable for your business. Any representations regarding status must be dealt with within the prescribed 45-day time scales (in accordance with a status disagreement process).

End-clients continue to monitor their classification and notify if they fall outside the scope of the legislation. We would recommend adoption of robust internal processes to monitor this.

:: James Morrison (james.morrison@dwf.law) is partner (commercial) at DWF in Belfast (www.dwf.law)