Monthly Archives: February 2021

Changes from April 2021: the burden of tax liability moves from the contractor to the end clients and the recruitment agencies.

From 6 April 2021 the rules for engaging individuals through personal service companies or other intermediaries are changing.
The responsibility for determining if the ‘off-payroll working rules’ (IR35) apply will be with the organisation receiving an individual’s services.

Ensure you understand:

– the impact of the changes on your organisation
– the actions you might need to take before the changes come into effect

BACKGROUND
The workplace should have been a level playing field, where you couldn’t have two individuals working side-by-side doing the same job, with one being taxed as an employee and one being treated as an independent contractor. This hasn’t always happened.

HMRC had estimated that only 10 percent of the contractor population was treating engagements as “inside IR35” and if that wasn’t properly addressed this would cost the Treasury up to £1.3bn per year by 2023-24. Their target is to increase the 10 percent to a third of all engagements being deemed inside IR35.

HMRC believed that the changes would affect approximately 60,000 medium and large-sized end-client engagers and potentially 20,000 agencies.
In terms of contractors, the changes were being presented as 170,000 contractors having less of an administrative burden – possibly because a lot of them would be closing down their PSCs (Personal Service Company).


GOING FORWARD:
(Payroll, HR and recruiting managers will need to understand the changes)

Steps you need to take:

1. Look at your current workforce.
This includes those engaged through employment agencies.

Identify individuals who are supplying their services through their own limited company (sometimes known as a personal service company), or other intermediaries.

Put in place processes to identify future individuals who work in this way.

2. Talk to individuals and agencies you engage with.
You may need information from them on some engagements.

Share the contractor factsheet to help your contractors understand how the changes may affect them.

3. Determine if the off-payroll working arrangements apply.
Check if the rules apply for any contracts that will extend beyond, or start after 6 April 2021.

Decide who in your organisation should be responsible for the determination of employment.

You can use HMRC’s Check Employment Status for Tax (CEST) service to find out if a worker should be considered employed or self-employed for tax purposes:
https://www.gov.uk/guidance/check-employment-status-for-tax

Look at escalations for difficult cases.

Make a determination ahead of April 2021 – as long as the information remains correct.

4. After you’ve determined if the rules apply.
You’ll need to tell the contractor (and any agency you engage with) the outcome.

Use a Status Determination Statement (SDS) to tell them.

5. Who will operate PAYE.
Consider if your organisation or an agency will have to operate PAYE.

If you’ll need to operate PAYE, put in place processes to make sure the correct Income Tax and National Insurance contributions (NICs) are deducted for engagements inside the rules from 6 April 2021.

6. Dealing with disagreements.
You’ll need to set up a process to deal with any disagreements about the employment status determination. This is a legal requirement.

7. Keep records.
You’ll need to make sure you maintain a robust audit trail. It is a legal requirement to keep records.

8. Test your processes.
You’ll need to test your processes, systems and controls to make sure you’re ready.

9. Changing working practices and contracts.
You should follow the processes you’ve set up to revisit status decisions and make new ones if you:

– change working practices
– change contractual arrangements
– renew contracts
– create new contracts

You can find more information about the April 2021 changes for off-payroll working and who it affects, here:
https://www.gov.uk/topic/business-tax/ir35



£40 million government funding to help businesses clean up

Some of the UK’s high-carbon-emission industries will benefit from £40 million funding to help them cut their carbon emissions (Published 7 February 2021)

• £40 million government investment to help polluting industries including steel, pharmaceuticals and food & drink to find new ways to reduce their carbon emissions
• solutions including using heat recovery technology to generate electricity and replacing gas with hydrogen fuel will help businesses cut energy costs, protect jobs, and improve air quality across the UK
• funding supports the government’s mission to build back greener and eliminate the UK’s contribution to carbon emissions by 2050

Some of the UK’s industries will benefit from £40 million funding to help them cut their carbon emissions, while reducing their energy bills, the government announced today (Sunday 7 February).
Businesses in energy-intensive sectors, including pharmaceuticals, steel, paper, and food and drink, will be able to apply for grants worth up to £14 million through the government’s Industrial Energy Transformation Fund – totaling £289 million in funding up until 2024.

In this second competition window, the minimum grant has been lowered to £100,000 for deployment projects, offering more flexibility for small businesses to receive funding so they can speed up getting their ideas to market.
With potential projects taking place across the East and West Midlands, North East, North West, and Yorkshire and the Humber as well as Wales and Northern Ireland, the government grants will enable businesses to use new technology to improve the efficiency of industrial processes and reduce energy demand.
They will drive them towards a cleaner, more sustainable future as part of our green industrial revolution by 2030 and mission to eliminate our contribution to climate change by 2050.
This includes factories installing electric motors and heat pumps to replace their natural gas-fired boilers and steam turbines, manufacturers using heat recovery technology to recycle waste heat and generate renewable electricity, and industries such as the food and drink sector carrying out studies to replace natural gas with hydrogen as their primary fuel.
Doing so will create and support thousands of British jobs, cut carbon emissions and lead to cleaner air for the people of the UK.
Energy Minister Anne-Marie Trevelyan said
We can only achieve our ambitious plans to tackle climate change if everyone plays their part, including businesses large and small.
That’s why our £40 million investment will not only help some of the highest polluting industries like steel, paper and pharmaceuticals build back greener by finding innovative ways to reduce their carbon emissions but will also create more opportunities for growth and jobs by leveling up and making industry fit for the future.
The fund supports the UK government’s mission to build back greener and level up the country’s industrial heartlands by allowing them to lay the path for economic growth.

The government’s Industrial Energy Transformation Fund is worth £289 million with funding available across England, Wales and Northern Ireland up until 2024. The fund supports heavy industry as the UK transitions to a low-carbon economy.
Today’s announcement follows an initial launch in June 2020 which saw 39 applications approved for funding in the first window, totaling £31 million.
It is calculated that as a result of these projects carbon emissions will be reduced by 2.6 million tonnes over their lifespan, which is equivalent to taking 38,000 fossil-fuelled cars off the road over a 30 year period.

The Industrial Energy Transformation Fund (IETF) window opens for applications on Monday 8 March and closes on Wednesday 14 July:

• find out more about applying for funding for the IETF Phase 1: Spring 2021 https://www.gov.uk/government/publications/industrial-energy-transformation-fund-ietf-phase-1-spring-2021-how-to-apply

• the Scottish Government is administering £34 million (£26 million from the IETF) for investment in Scotland and launched the Scottish IETF in December 2020
https://www.gov.scot/policies/energy-efficiency/scottish-industrial-energy-transformation-fund/