Employers’ National Insurance hike rumours bring IR35 into sharp focus  – London Business News | Londonlovesbusiness.com

With speculation mounting that the government could announce an increase to employers’ National Insurance (NI) in the Budget on 30 October, IR35 specialist Qdos has highlighted the implications this could have on businesses that mismanage the off-payroll working rules.

The introduction of the off-payroll working rules in the public and private sectors means businesses (excluding small private sector firms) engaging contractors are liable for missing employment taxes should they facilitate what’s known as ‘disguised employment’.

This is when a contractor who belongs inside IR35 is incorrectly engaged outside the scope of the legislation and deemed to be genuinely self-employed.

In the event of HMRC finding that a business has been non-compliant, the tax office will issue the fee-paying party (either the end-client itself or the recruitment agency) with a bill made up of missing employment taxes (employers’ NI) that should have been paid on the assignment.

Qdos CEO, Seb Maley, commented on rumours that the government will increase this tax, which currently stands at 13.8%.

Maley said, “It goes without saying that any hike in employers’ NI will see businesses with staff on payroll incur a direct cost increase. But there’s also the potential indirect cost, which firms need to be acutely aware of.

“By increasing employers’ NI, the cost of non-compliance under the off-payroll working rules would rise. In other words, firms found to have mismanaged these controversial rules would be hit with bigger tax bills from HMRC. Above all else, this highlights the importance of businesses meeting their obligations from a compliance perspective.

“Added to this, should the cost of employing staff rise, businesses that have needlessly insisted that all contractors operate on the payroll regardless of their IR35 status desperately need to rethink their stance.

“These firms are already paying 13.8% more on every genuinely self-employed contractor they’ve placed on the payroll. If employers’ NI creeps up, so does the cost of shifting these contractors onto employment contracts – an approach that far too many businesses took in response to the roll out of the off-payroll working rules.”