Off-Payroll Working
If you are a public authority or a medium or large sized business, known as end-clients and use contractors, the Off-Payroll Working (OPW) legislation could apply to you.
What is OPW?
OPW is a set of rules which place certain obligations on end-clients to identify and determine the employment status of workers who provide their services via an intermediary, usually through their Personal Service Company (PSC).
When did this legislation commence?
It was just over two years ago when the OPW legislation was introduced for the private sector, and six years ago for public authorities.
Are you compliant with OPW / IR35?
When a contractor provides their service personally, the end-client is required to assess the employment status of the contractor. Where a deemed employment status is determined, payments must be paid to the PSC or other intermediary via the payroll after appropriate income tax and NIC deductions.
Prior to the OPW rules coming into force, many end-clients invested heavily to ensure they had appropriate measures in place to comply with the legislation. These measures included the design and implementation of robust processes, controls and procedures and these were documented for good governance.
However, with the passage of time end-clients may have fallen in or out scope of the OPW legislation, had changes in personnel or adopted different procedures. Therefore, to ensure they remain compliant, end-clients may ask themselves:
- has anything changed since we implemented our measures
- are we still adhering to our policies
- would our current practices stand up to HMRC scrutiny
- do we have new or ongoing obligations under the OPW legislation.
Some of the changes to consider, include:
- a small business becomes medium or large; or vice-versa
- a change in business ownership
- a change in process owners
- a permanent establishment created in the UK
- familiarisation or complacency has set in.
Sadly, and all too frequently, we see clients implement robust controls and processes at the outset but fail to keep up to date, which can be their undoing when under the microscope of HMRC.
What should end-clients do?
HMRC expects end-clients to have adequate procedures in place in order to monitor and meet their obligations under this legislation.
Now could be a timely opportunity for end-clients to:
- check whether any changes to the business mean the OPW rules now or no longer apply
- initiate an independent review to check their current working practices comply with this legislation
- review all current arrangements to ensure the original employment status determination remains correct.
While this legislation applies to public authorities and medium or large sized businesses, a small business or a wholly overseas business should also have safeguards in place to check that they remain outside the scope of OPW rules.
HMRC has opened an off-payroll working calculation of PAYE liability in cases of non-compliance consultation, in which it seeks feedback from affected parties, including end-clients, to the proposed changes to address the double-taxation which can arise when there has been non-compliance with the legislation.
How can Crowe help?
At Crowe, our employment tax specialists have assisted many clients with design and implementation of robust controls and procedures to ensure they are compliant with the legislation. By combining our practical in-house experience as well as our technical expertise, we provide advice which is practical to implement.
Our specialists also understand the complexity and nuances when determining employment status. We help clients arrive at employment status determinations after considering all the facts.
If you have any concerns with regard to your OPW obligations or compliance, please contact Glen Huxter or your usual Crowe contact.
