The ATT says the cancellation of next month’s UK Budget should lead to a delay to a fundamental change in the way businesses employ the services of contractors. The change is planned for April 2020 but the ATT is calling now for it to be delayed by 12 months. This is because the longer the delay to the Budget and Finance Bill, the longer businesses will have to wait for the final legislation which will introduce these controversial changes to the off-payroll rules – leaving businesses with a greatly reduced and unrealistically short time frame in which to adapt to the changes.
If the rules are implemented as proposed in the draft legislation then, from 6 April 2020, responsibility for determining whether an engagement falls within the off-payroll rules will move from the worker’s personal service company (PSC) to the client (the business which requires the worker’s services). The party which pays the PSC (which may be the client, or an agency depending on the commercial arrangements) will then be required to operate PAYE and NICs as appropriate.
The lack of final legislation and detailed guidance combined with the current absence of an updated version of HMRC’s much maligned Check Employment Status for Tax (CEST) mean that there is a real lack of clarity as to how the off-payroll rules will operate in practice in the private sector. The ATT says this makes it near impossible for businesses to make adequate preparations. Under the current timetable there remains only a little over five months for businesses to get ready and this at a time when many will be preparing for or responding to the implications of Brexit, says the ATT.
Jon Stride, Co-chair of ATT’s Technical Steering Group, said:
“We strongly urge the Government to delay this major shift in how businesses engage with contractors until 2021.
“Many important practical issues, such as when liability can be transferred within an engagement supply chain and exactly what information will need to be shared by clients, are not addressed in the draft legislation at all. We have also seen only limited evidence of any HMRC education and information campaigns so far.
“Without a delay, we anticipate low levels of compliance and increased numbers of errors, and greater demand on HMRC telephone lines and HMRC staff for support at a time when their resources are already strained. We may also see risk-averse positions being taken by businesses, for example, a blanket decision to put all workers onto the payroll regardless of the nature of the arrangements, to the detriment of workers.
“The Government has previously stated that they were committed to learning from the rushed introduction of these rules to the public sector in 2017. We believe that introducing the off-payroll rules to the private sector in April 2020, when final legislation and detailed guidance are not yet available, risks repeating the errors made in the public sector, rather than learning from them.”
Notes for editors
1. Changes to the off payroll rules which are scheduled to be introduced for the private sector from April 2020. Similar changes were introduced in the public sector in April 2017, and were widely criticised for being rushed.
This was acknowledged on page 10 of HMRC’s summary of responses to the consultation Off-payroll working in the private sector dated 29 October 2018, which stated:
“The government is committed to learning from the public sector reform in taking forward similar reforms in the private sector. Based on the feedback received, the government will ensure that organisations have sufficient time to prepare for the changes by implementing the reform in April 2020, rather than April 2019. This is in recognition of the need for organisations to set up systems to comply with the reform and review existing contracts”
Delays in detailed guidance and final legislation being published for the private sector reform risk a similarly rushed introduction of the rules.