IR35 Reforms and Off-Payroll in Pubs

In April 2021 the HMRC rules are changing, this is expected to have a huge effect on employment practices in the pub’s sector, especially where a pub manager is a self-employed contractor (say) supplying staff or labour often via a small limited company – or personal service companies (PSC).

Those who are not genuinely self-employed will no longer be able to be off payroll and supply services to pub companies or landlords after April 2021. They will either have to become employed or stop working. It is not going to apply to tenants and lessees who rent pubs.

The data from the HMRC indicate the majority of small company service set-ups are not genuine self-employment and will fall foul of the new rules, the big change is that any company caught hiring “workers” under arrangements that fall foul will be fined from April onwards.

The change in April 2021 pushes the liability from the “worker” to the “hirer”, however, IR35 industry experts expect that there could well be investigations into all previous periods once they get the list of names from the companies. Worryingly high court cases against BBC TV presenters and Ryan Air pilots (who set themselves up as self-employed contractors) show that the liability falls fully on the individual “worker” and not the “hirer” for arrangements prior to April 2021. Workers in those cases were unsuccessful in blaming the hirers for their predicament (some said they were forced by the BBC into creating limited companies or would lose their jobs) and instead were left with large sums and fines owing to the HMRC. After several waves of test cases it is feared HMRC could target those in the low-paid sectors.

The HMRC expects to recoup over £100m per month by ending what has been dubbed “disguised employment” or “sham self-employment”.

IR35 tax reform – what is it?

It was unveiled in 1999, the measure came into effect in the public sector in 2017 the change is now being rolled out to the private sector and will force medium and large businesses in the UK to set the tax status of their contractors and freelancers (which was previously set by the contractors themselves). Contractors found inside IR35 will have to pay more tax than they might expect, many people will have to change status and become employed – though this is not a bad thing as they will then get employment rights such as minimum wages, overtime, pensions and holiday/sickness pay.

The reforms are the biggest crackdown yet on workers who behave as employees but avoid regular income tax and national income contributions by billing “hirers” through personal service companies (PSCs), which are taxed at (lower) corporate rates.

What can publicans do about IR35?

Check your status with the HMRC here

Find out more, speak to your “hiring” company and ask them if you will be employed after April 2021, and if not why not – get responses in writing.

If you are a self-employed contractor in the pub’s trade are worried or being offered an employment contract and need advice please drop us a line here