Workforce Report 2019

5.4 Changes to IR35 Legislation in the Private Sector Changes to taxation arrangements for those who are self-employed will, arguably, be the biggest challenge for mid-size and large companies in the coming year. Last year’s report highlighted that changes to IR35 tax legislation, already applied in the public sector, were highly likely to be extended to the private sector. This proved to be the case and changes will apply to the private sector from 6 April 2020. IR35 regulations have been in place for those who are self-employed and working through personal service companies (PSCs) since 2000. These rules say that if, were it not for the existence of the PSC, the individual would be an employee, then the worker should pay tax and national insurance contributions as if they were an employee. Until now, the self-employed person has largely determined whether their working arrangements fall within scope of the IR35 rules and HM Revenue & Customs (HMRC) would investigate the individual PSC if a breach was suspected. Under the coming changes, the responsibility for determining whether an individual is truly self- employed or falls within scope of IR35 will sit with the end user, i.e. the organisation that uses the services of the individual. The contractual arrangements in place will not prevent a PSC coming within scope; HMRC has been clear that the actual working arrangements will determine status. HMRC has an online test (the Confirmation of Employment Status for Tax [CEST] Test) which end users can use to help determine whether or not IR35 applies, but this cannot be relied on entirely and is under review as a result of feedback from the public sector and the consultation with the private sector carried out by HMRC last year. End users need to take into account criteria like right of substitution (provided this is real), mutuality of obligation and the level of direction and control the end user has. OGUK has worked with a number of member companies to produce guidance for members, which will be updated when the final legislation is passed in summer 2019. However, companies using PSCs, whether through an intermediary (e.g. a recruitment agency) or not, should be in action now to prepare for these changes, identifying risks and making policy decisions. The guidance can be found online at According to the aforementioned Skills Landscape report, with successful progress towards delivering Vision 2035 and the diversification of oil and gas companies into broader energy activities, the oil and gas workforce is anticipated to number around 155,000 in 2025. As well as managing the challenges and grasping the opportunities arising from upskilling, reskilling and the creation of new roles, the sector must do so against a background of social and legislative change.













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