New consultation on reforming the disguised employment rules (IR35) was published in May 2016. From this, it’s proposing to give HR professionals the responsibility for determining employment status’ when it comes to IR35. This is after the Government are planning to become tougher on those who fail to pay their taxes under IR35 disguised employment rules.
It’s a well-known headache for HR professionals when it comes to determining if someone is self-employed or an employee. However, the importance of determining employment status allows employers to understand how they are treated for tax, national insurance, employment law, pensions and much more – meaning if an employer determines this incorrectly, it could end up being costly!
The new consultation would mean that HR will need to ensure that contractors are in their own business and if not, engagers could face penalties. This change is due to come into force from April 2017 and will then be likely extended to private-sector hirers thereafter.
What does this mean?
The responsibility of compliance will move from contractors themselves, to the engagers. This means public sector HR managers will be able to use a digital tool, to ensure that contractors are in fact self-employed.
HR managers will need to become aware of this change and will need to get used to this responsibility being on them, rather than the contractor.
If HM Revenue & Customs challenge the employment status successfully, the engager faces a a potentially high price.
This consultation ends of 18 August 2016.
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