IR35 Changes Overview

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Pierce Bradford
6 years ago
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1 IR35 Changes Overview

2 Page 1 IR35 Changes Overview In response to the amendments made to the IR35 regulations in relation to PSC and Self Employed contractors working off payroll in public sector, a number of changes to Eclipse are due to be released. This document contains an outline of those changes. Umbrella / PSC Record This maintenance area will now, strictly speaking, only contain records for Umbrella companies. The candidate screen has been modified so that an additional field is added to any existing candidates that are marked as PSC/Umbrella. Using this field it is now possible to distinctly identify whether the candidate is operating via an Umbrella or a PSC. If changed to PSC, Eclipse will copy the company details from the Umbrella record in maintenance and break the link to the Umbrella company record. If there are no other candidate records associated with that company, then eclipse will remove the Umbrella company record for that PSC.

Page 2 Client Record New fields have been added to support Off Payroll Working in Public Sector: Public Sector Checkbox - Y/N denotes whether a client is considered a public-sector client for IR35.

3 Page 2 Client Record New fields have been added to support Off Payroll Working in Public Sector: Public Sector Checkbox - Y/N denotes whether a client is considered a public-sector client for IR35. Always IR35 Checkbox - Y/N this will be used as a default setting for the customer and any contracts that are created for them where a PSC or Self Employed candidate is assigned. Customers exporting to Tempest that do not use assignment.dat will use this field to indicate that all contractor timesheets for the client are to be treated as within IR35 and therefore subject to tax & NI. Note: The public sector must be checked first to enable a tick in the Always Off Payroll.

Page 3 Contract Record A new field has been added to support Off Payroll Working in Public Sector: IR35 rules apply This field will only be relevant when a) the related client is Public Sector and b)

4 Page 3 Contract Record A new field has been added to support Off Payroll Working in Public Sector: IR35 rules apply This field will only be relevant when a) the related client is Public Sector and b) the candidate assigned to a contract is PSC or Self Employed and will be used to denote that the client has identified this contract as a contract that is within IR35 for payroll and therefore all contractor timesheets for this placement are to be treated as within IR35 and therefore subject to tax & NI. The default value of this field will be based on the default setting on the client. This can be overridden on the contract itself (although the Tempest export will ignore the field on the contract itself and use the value from the client.)

Page 4 Candidate Searching It will be possible to search for candidates that are specifically PSC or Umbrella based on the new fields added to Umbrella / PSC records.

5 Page 4 Candidate Searching It will be possible to search for candidates that are specifically PSC or Umbrella based on the new fields added to Umbrella / PSC records. Timesheet Searching It will be possible to search for timesheets that are public sector and where IR35 rules apply. Contract Searching It will be possible to search for contracts that are public sector and where IR35 rules apply. Client Searching It will be possible to search for clients that are public sector. Batch Client Update An extension of the batch client update screen to enable batch Public Sector and Always Off Payroll of client records (permission permitting). Note: The Public Sector must be done prior to attempting to batch the Always Off Payroll.

) Batch Temp Contract Update To allow updates to existing contracts in a batch, a new option now exists within the batch

6 Page 5 Batch Candidate Update Extension of the batch candidate update screen to also enable batch un-authorisation of candidate payment details (would require the user permission to authorise candidate payroll info.) Batch Temp Contract Update To allow updates to existing contracts in a batch, a new option now exists within the batch update screen (would require batch update Temp contracts permission). The new feature allows existing contracts to be made IR35 applicable or not.

Page 6 Timesheet Processing Rules Additional options on the timesheet tab of system default preferences to Prevent/Warn/Allow processing of timesheets if the candidate s payroll information is

7 Page 6 Timesheet Processing Rules Additional options on the timesheet tab of system default preferences to Prevent/Warn/Allow processing of timesheets if the candidate s payroll information is not authorised. Additional options on the timesheet tab of system default preferences to Prevent/Warn/Allow authorisation of timesheets if the candidate s payroll information is not authorised.

Page 7 Changes to Sage Payroll Export Additional option in system default preferences to also export candidates to Sage Payroll if their timesheet is for

an additional option has been added to the export Timesheet wizard.

8 Page 7 Changes to Sage Payroll Export Additional option in system default preferences to also export candidates to Sage Payroll if their timesheet is for a PSC or Self-Employed contractor working under IR35 Where a timesheet record is to be exported twice (once for Sage Payroll and then Sage 50 purchases), an additional option has been added to the export Timesheet wizard. Following the initial export the timesheets would normally have been set to exported but where these are to be exported again, an additional option allows the timesheets to NOT be set as exported thus allowing the other export to take place.

9 Page 8 Changes to Merit / Tempest Export Changes to Client.DAT Field Name Attribute Picture Range Update? Mandatory? Example Data 82 Public Sector Alpha U "Y"=Yes, "N"=No 83 Always OPWIPS Alpha U "Y"=Yes, "N"=No Yes Yes No. If blank will default to No. No. If blank will default to No. "Y" "N" Changes to Assignmnt.DAT (Does not apply to eclipse4 standard functionality and will need to be amended by customers themselves if exporting assignmnt.dat) Field Name Attribute Picture Range Update? Mandatory? Example Data 110 OPWIPS rules apply Alpha U "Y"=Yes, "N"=No Yes No. If left blank, will default to No. "Y" For further information regarding changes to IR35 for Off Payroll Workers in Public Sector please see the guidance for agents on the HMRC website.

10 Page 9 FAQs Q. My candidate set up as payment type, PSCU/Umbrella are a mixture of actual Umbrella s and PSCs. Whilst I am marking which are which using the new fields, how can I ensure that I am not paying the PSCs the gross like I would with the Umbrella s? We have introduced the new field to separate PSCs from Umbrella s as a sub-option of PSC/Umbrella. The default value of this will be set to Umbrella. Umbrella companies are unaffected by IR35 and can be left as they are. Where the candidate is actually a PSC, you will need to un-authorise the payment details and change the new field s value to PSC. This will then mean that any attempts to place the candidate on a public sector contract will result in them being paid as PAYE. If you are unsure or are awaiting new contracts to be returned by the candidate, we have added a batch un-authorise feature to the batch candidate update screen which will enable you to unauthorise all PSC/Umbrella candidates in one action until such time that you have received new contracts and can re-authorise the payment details. Further new functionality provides extension to the block/allow rules for timesheet processing meaning that it is possible to prevent authorisation or processing of timesheets if candidate s payment information remains unauthorised. Q. Will Eclipse tell me how much I need to pay the PSC if I have put them through payroll? Our understanding of the new legislation suggests that when a PSC / Self-employed contractor is to be paid under IR35, the PSC still raises an invoice to the agency as normal including VAT on the full amount and rather than paying the full amount to the PSC, the agency exports the net amount to payroll, deducts the appropriate taxes and pays the deduction directly to HMRC. The agency then pays the difference between the deducted amount and the invoiced gross amount back to the contractor. The majority of this process is an accounting function process outside of Eclipse and as Eclipse is unable to calculate the PAYE deductions that your payroll software will, it is unable to calculate how much of the invoice should be paid directly to the candidate s PSC. Q. When we receive the update will the new Public Sector Checkbox on the Client Record be defaulted to Y? This is not our intention. Defaulting to Y would have potentially wider implications for customers that don t deal only with the public sector. We feel that it is safer for the default value to be equivalent to how the data is prior to the update so that customers can choose how to identify their own clients. Q. Can the default value for IR35 rules apply checkbox which is set on the client and then inherited on the contract be overridden? Yes. The check box can be unticked if necessary by editing the contract. Once a timesheet has been processed this is locked. Q. Can the IR35 rules apply checkbox be used for a contract with a candidate assigned via an Umbrella company where the payment method has not been approved? No. This check box is only enabled on the contract when the candidate is a PSC or Self Employed. Q. Is there a mechanism to prevent candidates being paid until contracts and pay details are received back?

11 Page 10 New functionality provides extension to the block/allow rules for timesheet processing meaning that it is possible to prevent authorisation or processing of timesheets if candidate s payment information remains unauthorised. Q. Will the SAGE Accounting export stop exporting data for PSC companies? As the IR35 legislation indicates that PSCs still need to invoice the agency as normal including VAT on the full amount, the SAGE accounts export will remain unaffected. Q. Will the payroll extracts for SAGE Payroll and SAGE Accounts need changing? SAGE Payroll extract needs to include PAYE and PSCs. We have changed the SAGE Payroll export to include PAYE, PSC (and Self Employed) timesheets assuming that the non-paye timesheets are under IR35 jurisdiction. Q. Will the payroll extracts for SAGE Payroll use the same supplier reference for the candidates? The Payroll reference in the candidate record will need to be entered to match the employee ref in SAGE Payroll for PSC candidates in the same way that it does for PAYE candidates. Q. What will happen if a candidate is paid via a PSC but the contract is outside of IR35? They will be treated in exactly the same way as they are right now and that contract s particular timesheet will not be exported to SAGE Payroll. Q. For assignment of a PSC contractor within IR35 will employer NI be selected automatically when a new contract is created? Our understanding of the legislation is that when using a PSC contractor to fill an IR35 vacancy, the agency should absorb IR35 from their margin OR alter the rates to PAYE equivalent rates which we imagine would incorporate employers NI. This would need to be decided by the consultant manually or via selection of the appropriate rate template as pre-agreed with the client.

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