Preparing for the IR35 rule changes 2021

Preparing for the IR35 rule changes 2021

Preparing for the IR35 rule changes

If your business utilises subcontractors who provide personal services through limited companies or other intermediaries then you may have to make substantial changes to comply with the new rules.

The government has reformed the off-payroll working rules which will apply to workers who supply their services to a client on a self-employed basis through an intermediary, such as a limited company.

These changes will come into effect from 6 April 2021. The intermediary is often known as a personal services company (PSC). HMRC has implemented these new rules to ensure that off-payroll workers’ pay generally the same tax and national insurance contributions as an employee.

It is currently the responsibility of the PSC to consider employment status and account for PAYE/NICs where necessary. BUT from April 2021, this responsibility will be on the engager to determine whether IR35 applies. If it does apply then tax and NIC will need to be withheld from the payment to the PSC.

Although the changes do not come into effect until April 2021, it is advised that those affected should start preparing now. HMRC has released a list of guidance for how to prepare:

• Look at your current workforce (including those engaged through agencies and other intermediaries) to identify those individuals who are supplying their services through PSCs.

• Determine if the off-payroll rules apply for any contracts that will extend beyond April 2021. You can use HMRC’s Check Employment Status for Tax (CEST) service to do this. (https://www.gov.uk/guidance/check-employment-status-for-tax)

• Start talking to your contractors about whether the off-payroll rules apply to their role.

• Put processes in place to determine if the off-payroll rules apply to future engagements. These might include who in your organisation should make a determination and how payments will be made to contractors within the off-payroll rules.

The new rules will not apply to small companies that have an annual turnover of less than £10.2 million, a balance sheet total of less than £5.1 million and less than 50 employees. The Government has estimated that, as a result of the exception for small businesses, 95 per cent of end users will not need to apply the reform.

Please talk to us if you have concerns regarding these new rules.

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Stephen Charles

Stephen Charles

Tax Partner, Sheffield

0114 266 7141
Government backs pension flexibility

Government backs pension flexibility

Senior doctors will have more flexible pensions under new plans launched by the government. The government argues high-earning clinicians would be able to take better advantage of pension provision and working patterns by building their NHS pension more gradually over time. This would be done by making steadier contributions towards their pension, without facing regular, significant tax charges. This would result in those clinicians being able to freely take on additional shifts, fill rota gaps and take on further supervisory responsibilities.

The new proposal is known as a 50:50 plan and would allow clinicians to halve their pension contributions in exchange for halving the rate of pension growth.

Health and social care secretary Matt Hancock said: “Each and every senior consultant, nurse or GP is crucial to the future of our NHS, yet we are losing too many of our most experienced people early because of frustrations over pensions. We have listened to the concerns of hardworking staff across the country and are determined to find a solution that better supports our senior clinicians so we can continue to attract and keep the best people.”

This new proposal comes after senior doctors have said that tax charges are discouraging them from taking on extra work as well as causing them to question whether the NHS pension scheme is right for them.

The government stated that the new flexible pensions would be available to ‘senior clinicians who can demonstrate they expect to face an annual allowance charge’. This covers doctors who have built up more than £40,000 of benefit in their NHS pension in a year and those who have an adjusted income of over £150,000, which includes pension growth.

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Consultation on ancillary capital gains reliefs

Consultation on ancillary capital gains reliefs

A capital gains tax (CGT) exemption applies when an individual disposes of a dwelling that has been used as their only or main residence under the Private Residence Relief (PRR) rules. The exemption applies as long as the relevant conditions are met throughout the total period of ownership. This relief is supplemented by ancillary reliefs that aim to deal with other related situations.

The government has previously announced and legislated to reform two of the ancillary reliefs to better target PRR at owner-occupiers. The reliefs which are being amended are:

  • the final period exemption will be reduced from 18 months to nine months, although the special rules that give those with a disability, and those in care, an exemption of 36 months will not change
  • lettings relief will be reformed so that it only applies where an owner is in shared occupancy with a tenant.

These changes will take effect from 6 April 2020. The government is now consulting on the changes in more detail and on how they will work in practice. It also invites views on some technical aspects of the PRR rules.

Internet link: GOV.UK consultation

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Tenant Fees Act: 2019

Tenant Fees Act: 2019

The new rules for landlords and letting agents in England came into effect on 1 June 2019. The Tenant Fees Act will make it illegal to charge tenants any fees apart from the rent, deposits, and other necessary costs.

It means tenants will no longer face fees for services including viewings, credit checks, references and setting up a tenancy.

Citizens Advice claims people renting privately in England have collectively been paying £13m a month in fees for viewings, credit checks, references and setting up a tenancy.

The ban in England was first announced by Chancellor Philip Hammond in November 2016, when the government said it would become law “as soon as possible”.

The new legislation states that tenancy deposits will be capped at five weeks’ rent where the annual rent is less than £50,000, or six weeks’ rent where the total annual rent is £50,000 or above.

The Government’s impact assessment said the new rules are likely to cost landlords £82.9 million in its first year, while letting agents will need to absorb £157.1m.

It will still be legal to charge fees for a change or termination of a tenancy if the tenant has requested to do so, or default fees such as late payment fees.

 

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