On Wednesday 11th July 2019, HM Treasury and HM Revenue & Customs published their draft Finance Bill 2019-20. The full draft is here: https://www.gov.uk/government/collections/finance-bill-2019-20
As expected, the draft confirms that the off-payroll reforms to the private sector will apply from April 2020 with the following details announced:
- End clients (provided that they are not exempt under the small business exemption – sections 382 and 383 of the Companies Act 2006) will be responsible for determining the IR35 status of the PSCs that they engage and passing this determination to the next entity in the supply chain as well as through to the worker directly. Failure to supply such a determination means that fee-payer responsibilities will sit with the end-client
- End clients that are not exempt from making determinations will have a duty of reasonable care, which means they must include the reasons why their determination was reached. A determination made without evidence being provided to support the determination will not be valid, which means that fee-payer responsibilities will continue to rest with the end client
- There will be a “client-led status disagreement process” allowing PSC’s and/or fee-payers to dispute a client’s initial determination. The client will have 45 days to respond to the challenge. The client must respond either by re-confirming the original status assessment or by issuing a new one. Failure to respond within 45 days will mean that fee payer responsibilities will rest with the end client
- Fee-payer responsibilities will sit with the entity that directly pays the PSC unless one of the prior parties in the supply chain has failed in its responsibility to pass on the status determination. In that instance the fee-payer responsibility will sit with the last entity in the supply chain to receive (but not pass on) the determination
- The fee-payer will be responsible for carrying out deemed salary deductions of Income tax and Employees NIC’s from the contract income, as well as accounting for Employers NIC’s and the Apprenticeship Levy, both of which – importantly – must not be deducted from the contract income.
Liberty Bishop Comments
One of the key characteristics of this legislation is the way in which the positioning of liabilities is dependent upon the creation of a valid determination and its subsequent movement through the contractual supply chain. An end client must author a valid determination and pass it on to the worker and the next entity in the contractual supply chain in order to shift fee-payer responsibility away from itself, and that entity receiving the determination from the client must also pass it down the supply chain in order to avoid fee-payer liabilities. The last entity in the supply chain before the PSC can’t avoid fee-payer responsibilities by passing the determination on, but it can be absolved of these responsibilities by the failure of an entity above it in the supply chain!
So, if we think of things at the level of the supply chain, the successful application of this legislation is dependent upon two key components; firstly, the ability for the contractual supply chain to be able to generate and communicate a valid determination throughout its length, and secondly, that the entity sitting next to the PSC in the supply chain must be willing and able to carry out the responsibilities of being the fee-payer, since it can only be absolved of these responsibilities by the actions of other parties in the contractual chain, not by its own efforts.
Liberty Bishop Assure provides contractual supply chains with precisely these two key components. It provides a combined assessment tool and information distribution platform, along with the ability to take up the position of fee-payer within the contractual supply chain should the agency not be comfortable with carrying these responsibilities.
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