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What is off payroll working?

The term off-payroll workers was coined by HMRC to refer to a cohort of workers who didn’t fit into the conventional categories of employed and self-employed.

Off-payroll workers are those workers at a company who are not on the PAYE payroll. They may be contractors, freelancers or consultants. In the medical sector, they may be locum workers or substitute teachers in the education sector.

How does off-payroll work?

The off-payroll working rules apply to contractors and their intermediaries. According to the HMRC, these off-payroll working rules may apply if a worker or contractor provides their services through their own limited company or another type of intermediary to the client.

What are the rules of off-payroll working?

The off-payroll working (OPW) rules ensure that any worker who provides services through their own personal service company (PSC) pay broadly the same tax and National Insurance as employees who are on the payroll. These rules are sometimes known as IR35 and are designed to combat tax avoidance by workers and the companies that hire them.

These are workers who are supplying their services to clients via an intermediary, such as a limited company, but who would be a payroll employee were an intermediary not used.

These workers are called ‘deemed employees’ by HMRC, and as a result, they need to pay tax and National Insurance at the same level as employees.

The original rules have been in force since April 2000 but were frequently criticised for being badly implemented and difficult to enforce. As a result, a new off payroll tax was introduced into the public sector in April 2017. These will be extended to the private sector from April 2021.

Genuine limited company contractors pay corporation tax on their profits at a flat rate of 19%.  They’re also able to treat their salaries as a deductible business expense. This means they can take a small salary and draw most of their income from their business in the form of dividends, reducing the amount of National Insurance contributions they are liable to pay.

Off-payroll working for public sector clients

From the 6th April 2017, the responsibility for determining the employment status of a contractor shifted from the individual being employed to the employer. If a particular contract is considered inside the IR35 rules, the party that pays the worker’s company has to deduct NI and PAYE from the payment that’s made to the PSC (Personal Services Company), through which the worker is contracted.

From April 2021, public sector employers will be required to provide a ‘status determination statement’ to both the contractor and the next party in the supply chain (e.g. a recruitment agency) who will then be required to pass this information on until it reaches the fee-payer.

The statement must include:

  • the status decision that was reached following due care and consideration
  • the reasoning behind the decision

If this requirement isn’t met the public sector organisation will be deemed the fee-payer and will be liable for any tax deductions.

Off payroll working for large or medium-sized private sector clients

From April 2021, the OPW rules that currently apply in the public sector will be rolled out to large and medium-sized companies in the private sector. This includes some third sector organisations such as charities.

The rules will be applied to private sector organisations that meet 2 of the following criteria:

  • the annual turnover is more than £10.2 million
  • the balance sheet total is more than £5.1 million
  • it has more than 50 employees

If these criteria are applicable to your business, you need to ensure you are aware of your responsibilities under the rule changes.

You can find out more about the OPW rules at the government website:

Rules for payroll working from April 2021

Off payroll working for smaller private sector clients

If your business does not meet 2 of the criteria laid out above for qualification as a ‘medium or large sized’ business, then it will continue to be exempt from the IR35 rules. This exemption does not apply to public sector organisations.

The government has included clauses in the legislation to ensure that medium and large-sized businesses are not able to set up arms-length companies or subsidiaries in order to contract services from PSCs. The criteria will be applied to the parent company, and the aggregate turnover, balance sheet and employee numbers of all the connected entities.

How do you check your employment status?

HMRC considers a number of factors when it comes to determining your employment status and liability for tax and NI. They will look at such issues as whether or not you are under the direct control of your client, whether or not a contract is repeatedly renewed creating a mutuality of obligation, do you use your own equipment or that belonging to your clients and who has the burden of financial risk.

If you have, in effect, become ‘part and parcel’ of your client’s organisation, you are likely to be deemed as employed. If you work for a number of clients, you’re more likely to be regarded as self-employed. They’ll also look for a range of other indicators that suggest you are a running a business on your own account. This might include whether or not you have a website, advertise your services or submit bids for contracts.

If all this seems confusing and you’re unsure where you fit in, the government have provided a tool on their website that allows you to check your own status, or that of someone whose services you are looking to employ:

Click here to check employment status for tax

For further information about off-payroll working, where you fit in and the expert umbrella solutions we offer for contractors and freelancers, get in touch with the friendly team at One Click Group today.

Benefits of payroll outsourcing for recruitment agencies

The cost and associated resources involved in running an efficient and reliable payroll can soon mount up. It takes a particular skill set, and for many businesses, including recruitment agencies, those costs can easily become a burden. It’s an involved and time-consuming task that takes you away from your core business.  Larger businesses are able to maintain payroll departments, but if your business has less than around 30 employees it rarely makes financial sense.

An increasing number of recruitment agencies are seeing the benefits of outsourcing their payroll management to an umbrella company.  

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How to Become a Contractor in the UK

Operating as a contractor is a life-changing business decision for many. But with so many hoops to jump through, it can be daunting to know where to start with such as positive change to your professional career.

So, what steps are involved in becoming a contractor in the UK?

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Five Reasons You Should Outsource Payroll

Managing your payroll can be a significant and painstaking burden. Conducted every month, correct calculations take time and mistakes can result in tangible and reputational costs not to mention the emotive issues, a delayed payroll can bring across to your workforce.

So, what does outsourcing your payroll involve and how can it potentially bring benefits to your business?

What is payroll outsourcing?

Simply put, outsourcing involves taking an element of your business that you would otherwise handle in-house and allocating it to a reliable external provider.

This allows you a range of options when it comes to resolving long-standing issues for your business or undertaking key tasks that you may not have the time or experience to resolve.

While this may have proved risky in the past, recent advancements in team and networking technology make managing your outsourced projects quick and simple.

For many businesses, this enables them to cut back on staffing needs or allow their internal teams to work on other projects while also massively cutting back on internal workloads.

This makes outsourcing an attractive proposition for companies looking to make their payroll actions fault free, fully compliant and opens novel ways for their businesses to compete in an increasingly crowded market.

Why should I consider outsourcing my payroll?

Selecting an outsourced payroll provider can result in several significant benefits that carry a range of long-term rewards. These include, but are not limited to-

1. Maximum Accuracy:

Choosing a trained and validated payroll provider can ensure that your work is completed to the highest possible standard and that errors are eliminated.

The calculation of payroll is an exacting business, even for members of your team with a professional pedigree and a stellar background.

However, we are all human and dealing with mistakes can be very time-consuming and highly stressful for the individuals tasked with handling the process and for key members of the company at large.

A quality payroll provider will work to reduce errors and minimise issues. And, when problems do occur, they will be able to step-in and tackle problems. This will enable you to undertake filings with greater accuracy and massively reduce your risk profile for internal audits.

This also allows for reliable output, preventing issues around compliance and avoiding some of the significant fines that can accompany breaches or leaks.

2. An Optimised Approach

Choosing a seasoned provider enables you to not only secure the support you need but allows your payroll actions to be completed at a faster rate than your internal teams would be able to achieve.

All providers will also be aware of the importance of data security and work in full compliance with GDPR, legal, and other sector-specific requirements.

This allows you to enjoy peace of mind knowing that your provider is fully trained and able to take care of your payroll actions.

And if there is a need to capture additional information or insight, your provider will be able to accommodate your reporting needs – letting you stay abreast of key metrics and stats for your own internal planning.

3. High Efficiency

Outsourced payroll companies are experts in their field and will allow for quick monthly filings with speed without ever compromising on accuracy.

This allows you to offload even the most complex of filings without having to worry about their workload – ensuring that your company gets value for money every month.

Removing this responsibility can prove to be particularly helpful for smaller businesses who would otherwise struggle with internal training or the risk of staff turnover.

Finding an affordable, reliable provider allows you to counteract the threat of embodied knowledge loss and help reorganise your business to be more internally efficient.

4. Minimised Resource Expenditure

Completing your monthly payroll allocations takes time, effort, and energy.

Letting an external agency to carry out your payroll tasks allows your in-house teams to refocus their time on internal tasks that may otherwise go unfinished or be sub-par in order to get them across the line in time.

Fault reduction also means that, in the unlikely event of an issue, your teams will not have to be pulled away from other projects to course correct and address the issues.

This helps insulate your business and helps future proof it against problems that could otherwise be costly to resolve. The time and effort can then be internally reallocated – helping you refine your own daily practice.

5. Cost Effectiveness

One of the most essential reasons for outsourcing, maintaining a large payroll department can be expensive for any business.

As your company grows larger, so too does the complexity of managing your departments. This can also prove to be extremely costly for smaller businesses that are attempting to scale.

An external team also acts as a valuable source of insight or guidance when it comes to preparing for future legal or administrative changes.

Building a working relationship with your provider means that, once they have proven their value, they can potentially be used in other areas in your business.

This can help allow you to scale, tackle long-standing issues, or even open your work up to opportunities you may otherwise have been unaware of.

If you want to learn more about the role that outsourced payroll action can play in your business, our team at One Click Group is here to help. With many years’ experience dealing with clients from a range of backgrounds, we understand the importance of providing a service that fits how you work.

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Claiming expenses as an Umbrella company employee – A guide

Claiming expenses can be an exacting and time-consuming process for contractors. For many, choosing to create an umbrella company can make the process straightforward, provided you know what you are doing.

So, how exactly does forming an umbrella company help when it comes to managing your expenses and what should you bear in mind when using one?

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When should you use an umbrella company?

An essential service for a wide range of contracting professionals, umbrella companies can open up a variety of options to help optimise how your business is run. However, knowing which option is right for you can prove extremely difficult – impacting on your ability to save time, resource, and effort.

So, what exactly is an umbrella company and how can your business potentially benefit from deploying one?

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