Many sectors have a long tradition of engaging contractors through Personal Service Companies (PSCs) and while numbers have reduced during the economic downturn, there remains a significant number engaged within the supply chain. Previously the matter of determining if an individual would be taxed as an employee or as self-employed lay with a PSC, but with the introduction of IR35 tax reforms by HMRC that responsibility will now fall to the end-user. In simple terms, the level of tax to be paid has not changed but the liability for making the assessment has changed and this will have repercussions for businesses and individuals throughout the supply chain.
Depending on the circumstances, the end-user could be the client at the top of the supply chain or another company within the supply chain. Many are now grappling with the thorny issue of how contractors’ tax should be treated – and if the end-user does not make the correct tax determination, they will leave themselves open to financial penalties. Individuals could potentialy face a pay cut of up to 25% if their hirer decides they are employed for tax purposes. The changes come into effect from April 2020, but employment law specialist’s advice to businesses is to act now.