View the presentation from the Churchill Knight Breakfast Seminar hosted on Friday 30th November 2018 in the Holiday Inn, Whitechapel, London.

1. Seminar: Off-Payroll in
the Private Sector
Location: Holiday Inn, Whitechapel, London
Date: Friday 30th November 2018
Time: 9:00am – 10:30am

2. Creating Partnerships Since 1998
• Thank you to everyone who attended.
• Please remember to book a meeting for
your agency and clients via your Churchill
Knight Account Manager now.
• As explained in the presentation, 2020
does not give you much time to prepare.
• Telephone: 0808 2525533
• Email: agency@churchill-knight.co.uk

3. OFF PAYROLL
WORKING IN THE
PRIVATE SECTOR
Crawford Temple

4. Agenda
• Background and History
• The Current Proposals
• IR35
• Starting to Prepare
• Next Steps

5. • Review the providers offerings for compliance
• Only those that meet the standards will be listed on our website as approved
providers:
• Umbrella – No Expenses
• Umbrella – Expenses
• CIS
• Accountancy Services
https://professionalpassport.com/Agencies/Approved-providers/372
• Only insurance backed Compliance Review
• Free agency and client membership to create insurable interest
• Provides due diligence evidence
Professional Passport

6. • IR35 was introduced in April 2000 and requires contractors operating through their own limited
company to pay additional taxes, similar to employees, where they are caught by the rules.
• Complexity of the legislation has made it difficult to assess status with certainty.
• This has also made it difficult and costly for HMRC to enforce.
• The lack of enforcement and complexity has resulted in a belief that many limited company
contractors are not paying the correct levels of tax as they are declaring themselves outside IR35.
Background and History

7. • In May 2016 HMRC released a consultation aimed at reforming the rules for limited company
contractors operating in the Public Sector.
• IR35 now referred to as off-payroll working
• HMRC claimed that non-compliance to the rules was estimated to cost the Exchequer £440m in tax
year 2016/17.
• The proposals were to change who assessed the status of the assignment as well as who was
responsible for the deduction and payment of the tax where the rules applied.
Background and History

8. ‘This new measure, “Off-payroll working in the public sector” moves responsibility for deciding if the off-
payroll rules for engagements in the public sector apply from an individual worker’s intermediary to the
public authority, agency, or third party paying the intermediary. The measure makes that public authority,
agency, or third party responsible for deducting and paying associated employment taxes and National
Insurance contributions (NICs) to HM Revenue and Customs (HMRC).
Background and History
The Outcome

9. ‘Where the rules apply, the person paying the fee to the intermediary for the worker’s services “the fee
payer”, is treated as an employer for tax, NICs and Employment allowance purposes.’
‘Where a public authority, agency, or third party, “the fee payer” makes a payment to a worker’s
intermediary on or after 6 April 2017, it decides if the rules apply, and then deducts tax and primary NICs
from the payment it makes, and pays employer NICs and is included for calculating the Apprenticeship
Levy. The VAT exclusive amounts must be accounted for through Real Time Information (RTI), in the
same way as for an employee. The change does not affect employment rights available to the worker.’
Background and History
The Outcome

10. • Obligations of the Public Sector Body to provide information on how an assessment has been made.
• Liabilities can be passed back to Public Sector Body where they have not considered status or
provided the evidence.
• Fee-Payer holds liabilities where they do not apply the rules correctly.
Background and History
The Outcome

11. • Difficulties in assessing correct worker status.
• Increased costs or reduction in quality of workers.
• Delays and disruption to ongoing projects.
Background and History
The Outcome

12. • Consultation released May 2018
• ‘This consultation considers a number of potential options for tackling the high and growing levels of non-
compliance with the off-payroll working rules in the private sector. However, the fundamental principles of
the off-payroll working rules – that the employment status test determines who should be taxed as
employees – are not being considered as part of this consultation. Similarly, this consultation will not
consider wider reforms of the taxation of employees, the self-employed, or those who work through an
intermediary.’
• ‘Non-compliance with the off-payroll working rules is an immediate and growing cost to the Exchequer. If
not tackled, this cost is projected to increase from £700 million in 2017/18 to £1.2 billion in 2022/23, which
could otherwise be spent on vital public services. It is therefore right for the government to consider how
this can be addressed now. Whatever the conclusion of the employment status consultation, the government
is clear on the underlying principle that where an individual is working in the same way as an employee,
they should pay broadly the same employment taxes as an employee.’
The Proposals

13. • ‘Overall, based on the evidence outlined above, it is the government’s assessment that the public
sector reform has had the intended effect of improving compliance in the public sector, whilst
recognising that public authorities and workers found some challenges in implementing the changes
required.’
• ‘The government considers extension of similar reform to the private sector to be the lead option
which will effectively tackle non-compliance. As set out in Chapter 4, the government recognises that
public authorities faced challenges in implementing the reform and that this is a concern for
businesses and individuals working in the private sector. We would therefore like to explore whether
the design of the reform and the implementation process could be improved.’
The Proposals

14. • Extension of the existing rules to the Private Sector.
• Possible amendments to liability structure placing more responsibility on clients to ensure supply
chain compliance.
• Implementation April 2020.
The Proposals
The Outcome

15. • The critical aspect of the new rules.
• Until now this has always been the contractors responsibility and if they assessed incorrectly it was
their liability. The proposals change all of this.
• End clients and recruitment companies have not had to consider this previously.
• Result – Low knowledge and awareness.
• Big learning curve to get up to speed.
IR35 – Off-Payroll Tax

16. • IR35 centres on considering three main points:
– CONTROL
• How much can the client control how, what, where and when the worker carries out the work?
– SUBSTITUTION
• Can the worker send a substitute to carry out the work on their behalf or is it the personal service of the worker that is
required?
– MUTUALITY OF OBLIGATION
• Is the worker obliged to accept additional work offered and is the client obliged to offer this work?
IR35 – Off-Payroll Tax

17. • Other factors that will be considered ‘in the round’:
– Part and parcel of the organisation
– Financial Risk
– Being in business on your own account
– Supply of equipment
IR35 – Off-Payroll Tax

18. Contractors perspective
• Inside IR35 will reduce the value of an assignment by around 25 – 30%.
• Increased costs in running limited company.
IR35 – Off-Payroll Tax
Consequences of being Inside IR35

19. Clients perspective
• Inside IR35 could increase costs by around 25%.
• Delays and disruption to existing projects.
• Reduced quality of workers.
• High turnover.
IR35 – Off-Payroll Tax
Consequences of being Inside IR35

20. Correct assessment of status is critical
IR35 – Off-Payroll Tax

21. 1. Assessing IR35 status:
1. Use HMRC ‘CEST’ tool
2. Use Contractor Calculator IR35 online assessment tool
3. Engage a specialist firm to advise
Starting to Prepare
Assess current assignments and workers for IR35

22. Starting to Prepare
Use HMRC ‘CEST’ tool
• Has been subject to much publicity on its short-falls and failings, ignores mutuality of obligation.
• Too simplistic in its approach.
• Provides an outside, inside or unable to assess result.
• Outcomes guaranteed by HMRC with caveats.
• www.gov.uk/guidance/check-employment-status-for-tax

23. Starting to Prepare
Use Contractor Calculator IR35 online assessment tool
• Detailed and built around past case law.
• Ideal for IT and Engineering based assignments.
• Provides a range of outcomes; strong pass, weak pass, borderline, weak fail, strong fail.
• Can provide detail and suggestions on actions to move to an ‘outside’ status.
• www.ir35testing.co.uk/TakeTheTest

24. Starting to Prepare
Use Contractor Calculator IR35 online assessment tool
• 100+ questions: all areas of case law (including MOO)
• Result provided on a 19-point scale

25. Starting to Prepare
Use Contractor Calculator IR35 online assessment tool
• Can provide detail and suggestions on actions to move to an ‘outside’ status.
• www.ir35testing.co.uk/TakeTheTest

26. Starting to Prepare
Engage a specialist firm to advise
• Look at each assignment in detail, the individual approach.
• Suggest actions and considerations to strengthen position.
• Respected by HMRC.
• Most costly option in the short term

27. 1. Understand the operating structures used by existing contractors
1. Limited company ‘PSC’
2. Umbrella company
3. Self-employed
4. Agency PAYE
5. other
Starting to Prepare
Map the operating structures

28. Starting to Prepare
Objective
• Create a status profile for all current assignments.
• Likely to see some outside, some inside and some borderline.
• Allows you to prioritise where to focus actions.
• Helps you to understand the potential impact of any changes.

29. • Further breakfast meetings planned that will build on the preparation work and outcomes from this
session and help you understand and refine these more.
• Consider any new assignments and the arrangements that would apply.
• Consider alternative engagement arrangements, such as statement of works.
• Work with your Churchill Knight Account Manager to deliver your own sessions for clients.
Next Steps

30. • Churchill Knight will be hosting additional
seminars with Crawford in the near
future. We will keep you up to date.
• In the meantime, please contact your
Churchill Knight Account Manager to
arrange a meeting now.
• Telephone: 0808 2525533
• Email: agency@churchill-knight.co.uk

31. Thank you for attending!