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Guest opinion: ensure you know the new tax rules relating to staff

Alastair Kendrick

Author: Alastair Kendrick (pictured), is an employment tax specialist at MHA MacIntyre Hudson who works in their motor team assisting clients in the sector. 

"There are a significant number of arrangements which those in the motor trade have utilised in regard to the engagement of personnel. 

We have seen a number of major changes to the tax rules which will impact here and I believe it would therefore useful to draw attention to these.

1. Workers engaged via an intermediary
From April 2014 where there is direction or control applied by either the intermediary or their client then PAYE and National Insurance needs to be operated by the intermediary.

From April 2015 these rules are strengthened with the requirement for the intermediary to provide on a quarterly basis a return of payments made to workers so HMRC can ensure PAYE/NI is applied when necessary. There is also penalties introduced which apply to intermediaries who fail to apply PAYE/NI.

If the worker is supplied via an offshore intermediary to the client then from April 2014 the client is required to apply PAYE/NI on payments they make to the intermediary

2. Umbrella arrangements
It was confirmed in the latest budget that from April 2016 (subject to further consultation) that there will be restrictions introduced on umbrella companies over the tax free travel and subsistence payments they pay to take away any advantage they have historically enjoyed. On this basis given this loss of tax advantage it is likely that the use of umbrella companies will cease to deliver any tax benefit and the arrangements will largely end

3. Status of workers
The Government is very concerned about the engagement of workers on a self employed basis when they should be employed. A report was commissioned from the Office of Tax Simplification which made a number of detailed proposals which are likely to be visited by the Government post election. In addition the business secretary is presently carrying out a review in this area

We are seeing a significant level of HMRC activity in this area if status is treated wrongly by an employer it can prove costly

4. Engagement of workers via personal service companies

HMRC is being watched over its work in this area by the public accounts committee that wants more challenges over whether arrangements should fall within IR35. If the arrangement is caught to IR35 then the tax consequences will in most cases remove any tax benefit for the worker and we are seeing retrospective reviews with claims to prior year tax/NI plus penalties

Given the changing face of status it is important those looking to engage workers outside of the normal employment method do take proper advice.

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