The government have decided to delay the start of the proposed VAT reverse charge for supplies by sub-contractors in the construction sector.
The reason for the u-turn is the lack of awareness of the change that was originally due to start on 1 October 2019. Many sub-contractors, and some main contractors, were not prepared for the changes on top of getting to grips with Making Tax Digital for VAT and consequently the government have decided to delay the start of the new rules for 12 months.
It has also come to light that some of those sub-contractors using the VAT flat rate scheme would be worse off which will require a review of whether that scheme is still worthwhile for them.
GET READY FOR THE “OFF-PAYROLL” WORKING RULES
Where large or medium-sized organisations are paying workers via personal service companies or agencies they will need to operate new procedures from 6 April 2020.
The new rules will apply to partnerships, LLPs and larger charities as well as limited companies. Only those organisations that would be classed as “small” under the Companies Act criteria will be outside of the new rules.
From 6 April 2020 the end user organisation will be required to determine whether or not the worker would be an employee of the organisation if directly engaged. That determination will need to be communicated to the agency supplying the worker so that income tax and national insurance is deducted from any payments.
The end user organisation should use the Check Employment Status for Tax (CEST) software on the HMRC website to carry out the determination. A copy of the determination should also be given directly to the worker.
WHAT IF THE WORKER DISAGREES?
Where the worker disagrees with the employment status determination they should contact the end user straight away setting out their grounds for disagreement.
The end user must provide a response within 45 days of receiving the disagreement. During this time they should continue to apply the rules in line with the original determination.