Major changes are due to take place for large and medium sized private sector employers who engage workers outside of the normal payroll.
Those particularly affected will be those who use workers who are provided via a labour or employment agency, or through their own Limited Companies.
Although the rules will apply from April 2021, having been delayed from April 2020, employers should start planning now to understand which of their workers will be affected by the changes and how their processes will need to change for new workers after April.
What is the background?
In a significant change to the rules, legislation relating to the engagement of workers by medium and large sized private sector employers is due to change in April 2021.
From that date, employers affected by the changes will have a number of new obligations including:
- Assessing the employment status of those workers and issuing a Status Determination Statement (SDS);
- Adding some of those workers to their payroll where they are “deemed employees”; and
- Operating an appeals process for those workers who disagree with their employment status.
What is the issue?
Employers will need to understand whether they are large enough to be caught by the new rules, and then decide which workers need to have employment status assessments carried out on them. Failure to either carry out the status assessment and issuing the SDS, or determining an employment status incorrectly, will lead to additional tax and NIC liabilities for the employer.
What do employers need to consider?
Employers will need to consider the following:
- Whether they are currently classed as either medium or large in April 2021 and whether they will need to operate the new rules immediately;
- Assuming they are caught by the rules, employers will need to identify all workers they currently engage outside of normal payroll procedures, including those provided by a labour or employment agency;
- Employers will need to determine the employment status of those workers engaged by the business who are paid outside of normal payroll processes, using accepted status “tests”;
- Once employment status has been determined, employers must have a process to communicate the results of that assessment via a Status Determination Statement (SDS) to each party in the labour supply chain;
- Where workers have been assessed as being deemed employees, for tax purposes, the employer must then operate payroll deductions on any payments made to them.
How can UNW Help?
UNW has been helping employers plan for the changes using the following methodology:
- Identification of all off payroll workers and how they are currently engaged;
- Determination of each workers employment status;
- Identification of those most likely to be deemed employees and the reasons for that assessment;
- Advising on communications to workers affected by the rules; and
- Helping to set up processes for employers to comply with the rules after April 2021.
If you would like more information about this, or any other employment tax related matters, please do not hesitate to get in touch with Lee Muter, Employment Taxes Partner, at firstname.lastname@example.org or Paul Tucker, Employment Taxes Senior Manager, at email@example.com.
Failure to either carry out the status assessment and issuing the SDS, or determining an employment status incorrectly, will lead to additional tax and NIC liabilities for the employer.