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TAXguide 03/20 Off-payroll working from April 2020: Are you a 'small' private sector client?

In light of upcoming changes to the off-payroll working regime, this guidance from the Tax Faculty outlines how to determine whether a private sector client using contractors through an intermediary is ‘small’.

The OPW legislation due to come into force on 6 April 2020 is still in draft. TAXguide 03/20 is therefore based on current understanding of the prospective measures and should be treated as provisional.

TAXguide 03/20

Tax Faculty members can download this guidance in full.

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Prior to 6 April 2020, a contractor providing services through a personal services client (PSC) to a private sector client is responsible for identifying whether they were a deemed employee for tax purposes. If they are a deemed employee, the contractor is responsible for accounting for PAYE income tax and Class 1 NIC through their PSC.

From 6 April 2020, the rules move responsibility for determining the deemed employment status of contractors working via PSCs for large and medium-sized private sector entities onto their clients. If appropriate, PAYE and NIC will need to be accounted for by the entity in the labour chain with whom the PSC has contracted, known as the fee payer.

The rules to determine whether an end-user client is small will based on the Companies Act rules, but tweaked to make it more difficult for a client to be ‘small’ for off-payroll working (OPW).

This TAXguide explains:

  • the periods of accounts against which small is measured,
  • the consecutive years test, and
  • the activities and size tests for the client and entities connected to it.

The guidance also contains an example case study.