The much awaited Autumn Statement 2016 is unfurled and with it many speculations have been put to rest for the recruitment agencies. Two prominent being off payroll working rules and IR35 reforms. Phillip Hammond briefly mentioned about self-employment during his Autumn Statement announcement, however the blue book clearly mentions under 4.11 Off-payroll working rules-“Following consultation, the government will reform the off-payroll working rules in the public sector from April 2017 by moving responsibility for operating them, and paying the correct tax, to the body paying the worker’s company."
The onus for IR35 will be on the recruitment agencies dealing with public sector employees. They will have responsibility of paying the right amount of tax and National Insurance Contributions (NIC) via payroll. According to the government this reform will help to check and tackle high levels of non-compliance with the rules being implemented by the public sector employers (or an agency or third party intermediary that pays the worker on behalf of the public sector body).
Another major decision taken by the government is the removal of the 5% tax-free allowance for business expenses for all off-payroll workers in the public sector. The rationale is that the workers will no longer have costs associated with assessing whether they are in or out of IR35 and is consistent with the government’s bid to equalize pay and tax for all workers, irrespective of whether they are permanent or contract. This will have strong implications on public sector recruitment agencies, forcing them to make deemed payments throughout the year and possibly bring them under the undue pressure to recruit workers, particularly if the earlier surveys which showed a large proportions of public sector contractors leaving for the private sector.
Now that the liability for the unpaid PAYE and NIC will be with public sector recruitment agencies, there are a lot more complexities which have to be addressed, some of them being
- Process to know if individuals fall in or out of IR35
- How to use the online test tool (which still hasn’t been seen)
- Discussing the technicalities with the payroll agencies and assessing how it will be calculated
- Cost of implementation and operation
- Taking professional assistance.
There are many questions and few answers. And what recruitment agencies will require is expert help. We can assist you in getting answers to your questions and provide you the much needed solutions. Our team is involved in the trials of the online test tool which might just help you to get deeper insights into its use. You can join us for the detailed updates and expert opinion by representatives of EY, APSCo and Gateley Plc along with details of possible solutions from QX Ltd itself at our event ‘Decoding the Autumn Statement 2016’ on 6 December in London.