Over the years you’ve no doubt become adept at managing the subtle intricacies of payroll. One minute things are going smoothly then suddenly another plate is launched into the mix, quick as a flash (by virtue of a few all nighters), you’ve adapted and that new plate is spinning away next to the others.
Come the morning of April 6th 2021 a delicate piece of porcelain is about to be thrown into the stack. It will require a steady hand and a good support structure to integrate it into your current business practices. What is this change? And, how can your business prepare itself to keep on performing successfully? This article will explain.
What is the new IR35 change?
In the past contractors were responsible for determining whether they fell within IR35 and needed to pay appropriate taxes that would apply to employees. The new IR35 changes mean that this responsibility now falls to the employer rather than the contractor.
In practice this means that medium and large sized private businesses will be responsible for identifying ‘disguised employee’ contractors and paying the relevant taxes.
While this article aims to give an overview of the IR35 changes. We recommend seeking further advice from a legal expert.
What does my payroll business need to do?
There are several steps that you can take now to help manage these changes successfully.
1. Prepare your business
Before you can work out where you need to be, you need to know where you are now.
Begin by looking at the potential impact this may have on your business. Ensure you have up to date information about all of the self employed contractors that are working with you.
Make sure that your payroll software has the flexibility to adjust the way payroll is processed for individual contractors.
2. Plan to implement the new IR35 changes
The new IR35 changes will mean checking each individual contractor’s employment status to help determine whether they qualify as a genuine self employed contractor or could be viewed as a disguised employee.
You need to ensure that your business has the staff and resources in place to communicate the changes with each contractor and prove that they are working compliantly.
HMRC have produced Check Employment Status for Tax (CEST). This is an online tool to help you determine an individual contractor’s tax status.
We recommend familiarising yourself, your staff and your contractors with the HMRC CEST tool as soon as possible.
3. Communicate with everyone involved in your payroll
Experience has taught us that good communication prevents a lot of issues. Begin speaking to your staff now about how you will implement these changes. Reach out to your contractors to let them know what is coming down the tracks. Sit down with your payroll software developer and make sure that your system is strong enough to weather the changes. If it isn’t you might think about finding a new payroll software developer.
We have over 30 years experience helping companies keep their payroll plates spinning. Why not give us a call and see how we can help your business.
We recommend also looking at this guidance from HMRC: