Tax and other legal changes affecting the UK Staffing Industry in 2017

Written on 16 Dec 2016

There are many changes at the moment. The Apprenticeship Levy will be here soon, and there are new VAT development which will affect the staffing supply chain.

What has caught most attention however is the confirmation in last month’s Autumn Statement that the government plans to introduce reforms, with effect from April 2017, which will affect the way in which “public authorities” and their staffing suppliers pay personal service company (“PSC”) contractors. The rules will move responsibility for assessing IR35 status, and paying the correct tax and National Insurance, to the body paying the PSC. Where a PSC assignment falls within IR35 the person paying the fee to the PSC for the worker’s services will be treated as the “employer” for tax, NICs and Employment Allowance. The rules are NOT intended to confer employment or worker rights on the PSC contractor but the payments will be included in the paying company’s payroll for Apprenticeship Levy and Employment Allowance purposes.

Who will be affected?

The changes will affect not only “public authorities” but also any staffing supplier and/or payment intermediary involved in the contractual chain supplying the PSC’s services.

Outsourcing service providers are not specifically excluded but it seems likely that genuine service-based outsourcing arrangements will be outside the scope of the legislation.  However certain labour-intensive outsourcing supply arrangements may be caught if the supply is, as a matter of contract and practice, a supply of individuals to work under the public authority’s (rather than the outsourcing company’s) control.  Staffing companies supplying into outsourced service providers who on-supply their services to “public authorities” will, therefore, need to assess whether the end “client” is the outsourcing company or the “public authority”.

What will the rules require?

The new rules will impose, for the first time, a duty on the “client” to provide information to the staffing supplier as to whether each PSC assignment falls within IR35 or not, with liability for payment and deduction of tax and National Insurance transferring to “public authority” if they fail to provide such information within the prescribed timescales.

“Public authority”, means all entities listed in the Freedom of Information Act 2000, and covers a wide range of organisations including: NHS trusts, police and other emergency services, local government, universities, Transport for London and many more. Staffing companies supplying PSC workers into these types of client will need to assess the likely impact of these changes on their business.

The draft legislation leaves a number of questions unanswered, but staffing companies and payment intermediaries are already starting to look at how the new rules will impact their businesses and what they need to do to prepare for the new regime.

And of course one big questions is: when will these measures be applied to the private sector?

One-to-one workshops

We are running one-to-one fixed price workshops with staffing companies and payment intermediaries to help them plan how best to prepare for next April.

Tax changes on the horizon: Breakfast seminar

We are also holding a breakfast seminar on 28 February 2017 to look at the these changes and other related issues announced in the Autumn Statement, including changes to the VAT Flat Rate Scheme, recent VAT cases, National Minimum Wage enforcement and tax avoidance measures, as well as the Apprenticeship Levy.  Please click here to register your interest.