Hi all
Been looking at the off payroll working rules and how they apply for Med/Large businesses from 06.04.20. I have been baffled by one thing though. My understanding is that if the worker does provide the services through any intermediary (such as a PSC) the few payer has to make a determination of the worker's status but exactly what is the definition of an intermediary and how does the payer decide if the worker has a PSC?
There is I think an overall consideration that the rules apply if the services are provided by the worker "through their own Limited Company - buy what is "their own Limited Company" I believe that there may be a rule about a 5% ownership to make it a PSC - I can't find any authority for this though.
For example if the payer is provided with (say) IT services by a Limited Company and one person provides those services, does the payer actually have to ask "are you an owner of this company do you own 5%". If "yes" then a determination is needed.
Thanks for any advice
Replies (13)
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I thought the term was intermediary, so you would probably need to look up the definition in either the off payroll rules or IR35 legislation. Although it is the end client’s view which matters.
Not all clients (end users) are making blanket decisions.
One of our clients has been through the HMRC CEST questionaire (even though it has been declared as not fit-for-purpose by numerous experts ) and has received an outside IR35 determination for our contractor. I believe that this CEST print-out is not enough in itself to be an SDS (Status Determination Statement) as an SDS needs a written reasoning as to why the contract is outwith the IR35 Off-Payroll Regulations. But it is a start
In the south west we have clients who have advised us that all of the banks, BAE and Thales have made a blanket decision. I assume many others have done the same.
Presumably they must because although an umbrella company is an intermediary it is excluded from the off payroll provisions.
The pdf produced by CEST is adequate as an SDS, it is dated, time stamped and addressed to the contractor and goes to them and the first agency, if any, in the chain. There' a whole section on CEST in the ESM:https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm11000
It is really no different to the client paying an individual. They have to decide if an employment exists and so apply PAYE. With off-payroll, the client as to decide if the contractor would be an employee were it not for the intermediary and, if so, apply PAYE to payments to the intermediary. The SDS is the client's decision which the contractor can contest.
Sorry I don’t really get your example of the plumber, wouldn’t all our (larger) clients have to make the assessment for our accounting services if the rules applied to all supplies?
Your problem is solved by ITEPA 2003, s 61U, which imposed information requirements for the public sector rules in Chapter 10 from 2017, which will apply from 6 April 2020 to all the OPW rules:
"61U Information to be provided by worker and consequences of failure
(1) In the case of an engagement to which this Chapter applies, the worker must inform the potential deemed employer of which one of the following is applicable—
(a) that one of conditions A to C in section 61N is met in the case;
(b) that none of conditions A to C in section 61N is met in the case.
(2) If the worker has not complied with subsection (1) then, for the purposes of section 61N(1), one of conditions A to C in section 61N is to be treated as met."
The conditions A to C in s61N test whether there is a company, partnership or individual within the IR35 rules. So, the client is told by the worker whether it's an IR35-type PSC entering into the contract.
If the worker doesn't give the information, the client operates the OPW rules anyway, so the worker has to comply.
If the worker lies and provides a fraudulent document as purported evidence of being outside OPW, s61V moves the PAYE liability back onto the PSC at the point when the fee-payer would have ordinarily been liable.
It's perhaps surprising that the CEST tool doesn't ask the hirer to confirm that there's an IR35-type PSC involved before launching into all the circumstantial questions. It assumes that you wouldn't be looking if you didn't need to do so, and starts by asking whether you are testing for ordinary employed v self-employed or for IR35/OPW.