Commercial Secretary to the Treasury Baroness Neville-Rolfe has responded to a written question from Lord Mawson (Crossbench) relating to the impact on charities of having to comply with the requirements of new legislation regarding the tax treatment of off-payroll workers in the public sector (IR35 legislation). The question highlights the replacement to the Employment Status Indicator as a particular issue.

Lord Mawson: “To ask Her Majesty’s Government what assessment they have made of the impact on (1) small and medium-sized enterprises, and (2) charities, of having to comply with the requirements of the Employment Status Indicator when procuring services from individuals.”

Baroness Neville-Rolfe: “At Budget 2016, the Government announced that from April 2017, where public sector workers are engaged through their own limited company, responsibility to operate the off-payroll working rules (often known as IR35) and deduct any associated tax and National Insurance will fall to the public sector body, agency or other third party paying the worker’s company. The reform does not introduce a new liability, but aims to ensure that the current rules work as intended. HM Revenue and Customs (HMRC) published an assessment of the administrative burdens of this legislative reform at Budget 2016 and this was updated on 8 March 2017. This assessment also covers charities and small and medium sized businesses.

“To help customers know when the off-payroll working in the public sector rules apply, HMRC has developed, after extensive consultation, an online “Check Employment Status for Tax” (CEST) advice service. CEST replaces the old Employment Status Indicator.

“Affected businesses will incur one-off costs for familiarisation with the new rules and this includes using CEST. Ongoing costs for using CEST are expected to be negligible. It is an optional service which sits alongside detailed online guidance on employment status.”

For more information on IR35 legislation and the changes involved, you can read Susan Ball’s commentary on the topic.