From April 2021 the rules for engaging individuals through personal service companies are changing for private sector organisations (including charities). The responsibility for determining whether the off-payroll working rules (sometimes known as IR35) apply will move to the organisation receiving an individual’s services.

Small companies will be exempt which will mean a large number of charities will be excluded. The Companies Act definition will be used – to be small a company must meet two of the following conditions

• annual turnover must be not more than £10.2 million (this excludes donation and grant income as clarified by CTG)
• the balance sheet total must be not more than £5.1 million
• the average number of employees must be not more than 50.

CTG has collated a wide range of HMRC guidance notes and expert commentaries here. The Check Employment Status for Tax (CEST) tool helps individuals and organisations decide if a worker should be treated as employed for tax purposes. It takes users through straightforward step-by-step questions.

The focus now is on customer readiness. The Government has launched a review of changes to off-payroll working rules to address any concerns from businesses and affected individuals about how they will be implemented.

We understand that a number of charities are now being contacted by HMRC (most likely through their Customer Compliance Managers) inviting them to take part in an educational call regarding the off-payroll changes.

Charities that expect to be caught by the off-payroll working rules should look out for a Off Payroll Working Letter like this and an associated “readiness” for off-payroll working questionnaire – questions reproduced below:

1. Are you aware of the changes to the Off-payroll legislation from 6 April 2020?
2. Have you considered the impact of the changes on your organisation?
3. What steps are you / the group / group companies taking to prepare for the changes? For example, have you, or are you planning to, carry out any internal reviews to ensure that group companies can make accurate employment status decisions for individuals who supply their services via their own intermediary – usually a personal service company (PSC)?
4. Who is currently responsible for deciding the employment status of individuals engaged directly by a group company? For example – HR Department, line managers, payroll department, group tax department or external advisers
5. If different to Question 4, who will be responsible for making employment status decisions for individuals who supply their services via their own intermediary (usually a PSC) from 6 April 2020?
6. If a group company engages Off-payroll workers through an employment business/agency, can the group company identify individuals who supply their services via their own intermediary (usually a PSC)?
7. On average, how many individuals supplying their services through their own intermediary (usually a PSC) does your group (or each group company) engage each year directly?
8. On average, how many individuals supplying their services through their own intermediary (usually a PSC) does your group (or each group company) engage each year via an employment business / agency?
9. If you would like more information on the new legislation, please provide further details so it can be included in the call.