There was a discussion on another thread about the meaning of "payment" in the context of the new legislation. Although I assumed that general principles regarding that word as used in taxation would apply, I did say I would go and make some enquiries. I have done that and present my thoughts below.
In very simple terms however, I was incorrect in my assumption and I believe - as postulated by the poster (jamesbrown) who raised the matter - that we should give "payments" a more natural definition.
The new rules refer to all "payments" made after the start date as being within their provisions.
Thus a payment made after 6th April 2020, regardless of the working period it relates to will potentially be seen as income subject to a rate of tax (and NIC) as though you were an employee.
This is going to create some difficult scenarios.
Let's consider the following examples.
Example 1 - you are at Big Co, outside IR35 in March 2020 and remain there after that time, still outside IR35.
Example 2 - you are at Big Co, outside IR35 in March 2020 and remain there after that time, but you are adjudged to be inside IR35 from 6th April 2020.
Example 3 - you are at Big Co, outside IR35 in March 2020 and leave at the end of that month.
Example 1
There will be no change in your gross payments. It will be the case that the agency paying you/your PSC will likely be the "fee payer" and therefore liable to pay tax/NIC in the event that the SDS (Status Determination Statement) is challenged and found to be incorrect. Look out for changes in contract terms that seek to permit the agency to recover this from you/your PSC.
Example 2
Payment made to you after 6th April 2020 will be assumed to be within the new rules and therefore subject to tax/NIC at an employee equivalent rate. The agency/fee payer will be responsible for making this deduction.
This is the case even though the payment may relate to work done prior to 6th April 2020.
This may not be the case where you can show that the role you filled prior to 5th April 2020 and the role after that date were sufficiently different such that they would produce different results for IR35 purposes.
Big Co will be assessing your role in April 2020 and applying the tax rules based on that assessment. If this is a different role, then I cannot see grounds to make deductions.
I do warn you, Big Co and agency, that should HMRC find the resources, this will be a area they will investigate. I cannot for the moment see that this will be worth their while, but we all know that any sensible risk/reward equation has long deserted HMRC.
Example 3
Here I think that as Big Co has no contract to assess, there is no inside/outside IR35 question and therefore no reason to change the manner of the payments made after that date. In other words they will remain free of deductions by the agency.
In very simple terms however, I was incorrect in my assumption and I believe - as postulated by the poster (jamesbrown) who raised the matter - that we should give "payments" a more natural definition.
The new rules refer to all "payments" made after the start date as being within their provisions.
Thus a payment made after 6th April 2020, regardless of the working period it relates to will potentially be seen as income subject to a rate of tax (and NIC) as though you were an employee.
This is going to create some difficult scenarios.
Let's consider the following examples.
Example 1 - you are at Big Co, outside IR35 in March 2020 and remain there after that time, still outside IR35.
Example 2 - you are at Big Co, outside IR35 in March 2020 and remain there after that time, but you are adjudged to be inside IR35 from 6th April 2020.
Example 3 - you are at Big Co, outside IR35 in March 2020 and leave at the end of that month.
Example 1
There will be no change in your gross payments. It will be the case that the agency paying you/your PSC will likely be the "fee payer" and therefore liable to pay tax/NIC in the event that the SDS (Status Determination Statement) is challenged and found to be incorrect. Look out for changes in contract terms that seek to permit the agency to recover this from you/your PSC.
Example 2
Payment made to you after 6th April 2020 will be assumed to be within the new rules and therefore subject to tax/NIC at an employee equivalent rate. The agency/fee payer will be responsible for making this deduction.
This is the case even though the payment may relate to work done prior to 6th April 2020.
This may not be the case where you can show that the role you filled prior to 5th April 2020 and the role after that date were sufficiently different such that they would produce different results for IR35 purposes.
Big Co will be assessing your role in April 2020 and applying the tax rules based on that assessment. If this is a different role, then I cannot see grounds to make deductions.
I do warn you, Big Co and agency, that should HMRC find the resources, this will be a area they will investigate. I cannot for the moment see that this will be worth their while, but we all know that any sensible risk/reward equation has long deserted HMRC.
Example 3
Here I think that as Big Co has no contract to assess, there is no inside/outside IR35 question and therefore no reason to change the manner of the payments made after that date. In other words they will remain free of deductions by the agency.
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