Royal Mail contractors ‘frustrated’ with tax status testing scheme
The Royal Mail is reorganizing its unpaid workforce so that people whose commitments ‘are likely’ to fall within the scope of the IR35 reforms are moved to pay-as-you-go work arrangements (PAYE ), the company confirmed.
In a statement to Computer Weekly, a Royal Mail spokesperson said the company had, with the prospect of IR35 reforms coming into effect from 6 April 2021, sought to assess its contractors – at the both from an individual and role-based perspective – to assess their tax status.
As a result, it is now moving people flagged by these assessments as “likely to work” within IR35 from April 6, 2021 to PAYE working arrangements.
This work may result in the company adding these people to its own payroll or asking the relevant people to provide their services in the future through a PAYE umbrella company.
“In preparation for [for the reforms] we have undertaken initial assessments, both on an individual and role basis, and as part of this review, Royal Mail is moving those who we believe are likely to fall into PAYE deals, ”said a spokesperson.
“In doing so, we ensure our compliance with the law without commenting on the current tax provisions of these individuals. “
Under the terms of the upcoming reforms, from April 6, 2021, medium and large private sector organizations will take responsibility for determining how the entrepreneurs they engage with are to be taxed.
At present, it is up to entrepreneurs to declare for themselves whether the work they do and the way it is done means that they should be taxed in the same way as self-employed workers (apart from the ‘IR35) or as permanent and salaried employees (within IR35).
An internal IR35 designation therefore means that the entrepreneur in question is considered an employee of the company for tax purposes, so his gross salary will be subject to PAYE and National Insurance deductions.
In accordance with HM Revenue & Customs (HMRC) IR35 guidelines, private sector organizations should exercise “reasonable care” when determining the tax status of contractors they hire by individually assessing their working arrangements on a case-by-case basis. .
The result of these assessments should be confirmed in writing to the contractor in the form of a Statement of Status Determination (SDS), which should also describe the reasons why their engagement has been classified as within or outside. outside of IR35.
Computer Weekly understands that Royal Mail’s preparations for the start of the reforms have frustrated some contractors as the company does not issue SDSs to contractors whose roles have been judged within IR35 as a result of ‘assessments initials ”that she made.
The entrepreneurs further claim that it was difficult for them to challenge and question the results of these “initial assessments”.
In response to this, a Royal Mail spokesperson confirmed: ‘We will not provide PAYE workers with specific determination or reasons as we are only required to do so when engaging through an intermediary after April 6. 2021.
The spokesperson added: “For those engaged via an intermediary after [this date], we will issue a status determination statement and provide an appeal process in accordance with our obligations. “
Computer Weekly shared details of Royal Mail’s IR35 preparations with HMRC, who said they could not directly comment on the company’s approach. Despite this, a spokesperson for the tax collection agency confirmed that private sector companies are only required to provide entrepreneurs with an SDS once the reforms go into effect early next month.
“When the rules for unpaid work change on April 6, 2021, all affected client organizations must have a process in place that allows workers operating through an intermediary, such as a personal services company, to be out of touch. ‘agreement with the determination of their status. They must also share their declaration of status determination (SDS) with these workers, as well as the reasons why they came to this conclusion, ”the spokesperson confirmed.
“Businesses may wonder if public limited companies or other intermediaries are the best way to hire subcontractors if they are working as employees. This is a business decision that organizations must make, and organizations are free to decide how they engage their workers.
“Some organizations may decide to offer workers contracts or offer them positions through an agency rather than directly,” the spokesperson added.
Dave Chaplin, CEO of entrepreneurs tax compliance consultancy IR35 Shield, said Royal Mail’s approach to complying with reforms is one that many others appear to be taking as well, based on his research.
In a recent survey of 3,000 entrepreneurs conducted by IR35 Shield, 47% of respondents said they had not received an SDS once the end customer had completed their assessment of their tax status.
“That’s a lot of entrepreneurs who are not being treated properly under the new legislative requirements. While companies technically have nothing to do until the legislation goes into effect on April 6, all that only arouses the contempt of entrepreneurs who seek certainty of their status, besides creating a risk. cliff edge for the company, ”Chaplin told Computer Weekly.
“We’re only a few weeks away, and there are smarter avenues that produce less risk for companies wishing to embark on the new legislative framework early.”
There is also growing anecdotal evidence that entrepreneurs vote with their feet when told their jobs are in the IR35 and that they have to switch to the PAYE arrangement if they are to continue working for the company in question, added Chaplin.
“Given the choice to go to payroll, many entrepreneurs choose to ship and seek alternative contracts where they are treated fairly,” he said.
“Entrepreneurs are losers, as are companies that get it wrong, who will see projects delayed and disrupted due to non-compliant approaches and laissez-faire to assess or rather fail to assess their contingent workforce.
“A company that takes a strategic and appropriate approach to its compliance obligations should not fear the legislation and are unlikely to fall victim to any HMRC challenge that could arise,” said Chaplin. “HMRC says it wants to help companies implement the rules properly and this seems to be a case where intervention is absolutely necessary.”