This Autumn’s budget has seen the UK Government introduce changes which will have a significant impact on employers who will now have a larger responsibility to determine the correct tax status for their staff.
Since April 2017, it has only been public sector employers who have been charged with the responsibility of identifying who should be treated as employees for the purposes of income tax and national insurance contributions. Now, however, this obligation will also fall upon medium and large scale private employers.
No longer should private employers assume they are protected because they are using self-employed contractors engaged through intermediary companies. If these employers do not get things right they will be left carrying the can for the income tax and national insurance contributions which should have been paid to HMRC. Financial penalties are also likely to follow.
Significantly, this change will not be introduced until April 2020. This is to allow private businesses a fair and reasonable opportunity to put their houses in order before they might be hit by any penalties. On considering this, the government has acknowledged it takes a certain amount of time to put in place significant changes in and around the area of payroll as was the case previously with the introduction of auto-enrolment for workplace pensions.
This change to the legislation is seen as one of several moves from the Chancellor towards collecting more tax from large scale private employers following the backlash that has arisen in recent years regarding Amazon, Google and other successful companies who have been accused of UK tax avoidance.
Some have criticised the change that it does accurately reflect the gig economy which we now live in where more and more people work for themselves on a project to project basis. Others have said the change fails to fix the problem where the courts and HMRC still have an entirely different take on what represents an ’employee’. Time will tell in terms of how this affects employers and what additional money (if any) is generated for the government’s coffers.
Colin Foote Employment Law