Any hopes for a second postponement of the Off Payroll Working Rules (we know a few of you out there were still holding out for such a wish) have sadly been well and truly dashed as the new rules came into effect on 6 April 2021.
The rules require medium and large private sector businesses to determine the tax status of any freelancers they engage via personal service/loan out companies and to pass this determination to the freelancer in the form of a status determination statement (SDS). The new rules then provide a statutory framework by which the freelancer can dispute the SDS, a process which we are already assisting clients to navigate. Perhaps most importantly, should the SDS determine the freelancer to be a 'deemed employee' for tax purposes, you must ensure that the appropriate tax and national insurance deductions are made from any fees paid to the freelancer.
It's not all bad news though, as HMRC has committed to waiving penalties for the first 12 months of the new rules, unless there is evidence of deliberate non-compliance. Dare we say it but overall, it's hard to dispute that the rules are reasonable and largely bring intermediary engagements in line with the risks that have always been prevalent when engaging freelancers directly. Some would say such consistency is long overdue.
If you haven't already, check out our briefing note on actions to take to ensure compliance with the new rules.
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