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ARM: The Off-Payroll Rules in the Private Sector – March 2020 Update


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Following the Budget announcement on 11th March 2020, ARM have prepared some slides that detail the top-level facts around IR35 and highlight some of the key areas that require our attention and due diligence.

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ARM: The Off-Payroll Rules in the Private Sector – March 2020 Update

  1. 1. The Off-Payroll Rules in the Private Sector – Update March Strategic Resource Management
  2. 2. IR35 Overview IR35 OVERVIEW 1. What is IR35? 2. General Principle 3. How it is determined 1. Case law not legislation 2. Takes into account full working practices 3. Test for tax status – not employment rights
  3. 3. Client responsibilities • Determine the status of each assignment – even if “Inside” or policy ban of PSCs in place/ • Use reasonable care in making determination – see guidance. • pass the determination statement to party that it has entered into a contract with and the worker. • Include reasons for determination. Client Agency 1 Fee-pay er PSC Worker Contractual chain Proposed change (tax liability) Client required to provide status determination together with the reasons for determination to party they contract with and the worker. chain 1 2 Status determination and reasons for determination are required to be passed down the contractual chain. 3 Client required to provide status determination and reasons for determination to worker.
  4. 4. Client Contractual chain Action required Proposed change (tax liability) Agency 1 Agency 2 Agency 3 Fee payer PSC Status determination flows down contractual chain1 2 Agency 3 fails to share the status determination with the feepayer 3 The liability initially sits with Agency 3 4 If HMRC fail to collect the liability from Agency 3 the liability transfers directly back to Agency 15 If HMRC fail to collect the liability from Agency 1 the liability finally transfers to the client Supply chain risk • Supply chain’s responsibility to pass the SDS down the supply chain – if SDS not received from client then they can pay the worker gross. • It is the “Fee Payer’s” responsibility to deduct tax and NI at source. • Agency 1 take on additional liability for supply chain failure.
  5. 5. ✔ The people making the decisions should be trained, suitably qualified and understand the rules. ✔ The need to consider all facts and speak to different teams internally and also the contractors – directly or through a recruiter. ✔ Consider determination method for on-going determinations. ✔ Keep records of decision and communicate the decision. ✔ Re-do determinations periodically – on extension/every 6 months. Reasonable Care….?
  6. 6. ✔ Statement of work – ensure you read government guidelines fully and take advice. ✔ Blanket bans vs policy changes. ✔ Appeals – turn around quickly. ✔ Supply chain compliance & financial stability. ✔ Start looking at adjusting working practices to engage true self employed, valuable/niche resource. What to be cautious of
  7. 7. How we can help IR35 Change Management and Support Services ✔ PMO for clients and/or external providers to execute joined-up solution ✔ Manage contractor communications ✔ Advise and manage changes to payroll model if required ✔ Strategic resource planning post April 2020 ✔ Tailored contracts to support status and supply type Our value proposition: ARM offer our clients significant expertise and robust processes for both existing and future contractor population, providing clients with a compliant, efficient and cost effective service and to achieve the following objectives: • Increased mitigation against legislative, financial and reputational risks • Streamlined, efficient financial process and improved working capital • Enhanced contractor care, management and communications
  8. 8. How we can help…continued Supply chain risk management supply chain consolidation or Vendor Managed Service including Workforce & Supply Chain Audits:- Management of Direct contractors Minimising your risk and administrative burden Alternative resourcing solutions • Fixed price assignments • Statement of Works (SoW) • Employed models • Service outsourcing. ✔ Contractor payroll mechanisms ✔ Supply chain compliance ✔ Managed Services Company compliance ✔ Criminal Finances Act compliance ✔ Onshore & Offshore Intermediaries compliance ✔ IR35 compliance, both now and future risks ✔ Contractual terms ✔ Insurance levels ✔ Right to Work ✔ National Living & Minimum Wage ✔ Working Time Regulations ✔ Agency Worker Regulations
  9. 9. Transition Management Questions & Answers Any questions? Contact us