New IR35 tax rules and charity retail

This April sees significant changes to tax rules that apply where workers are being paid via their own limited company (or other intermediary). Larger organisations will for the first time be responsible for assessing whether any workers paid via their own limited company (or other intermediary) are actually acting as “disguised employees” and benefiting from paying less tax and national insurance than they would if they were an employee.

The new rules will only apply to organisations that meet two of the following criteria:

  • have an annual turnover of more than £10.2 million (excluding donations and other voluntary income)
  • have a balance sheet total of more than £5.1 million
  • have more than 50 employees

Smaller companies will be exempt from the rule changes and the worker’s limited company or other intermediary will continue to be responsible for deciding the worker’s employment status and whether or not the IR35 rules apply.

Ahead of April 2020, charity retailers who are covered by the rule change will need to establish whether any of their workforce are being paid via their own limited company (or other intermediary such as a partnership). If this is the case then an assessment will need to be carried out for each individual to determine if they should be treated as an employee for tax purposes. The Government have produced an online assessment tool which can be used to help make this assessment.

In cases where it is determined that a worker must be treated as an employee for tax purposes then the organisation paying the workers intermediary will need to deduct employment taxes from the payment being made.

We have produced a new policy guidance paper, available here, which goes into more detail on this tax change and what affected charity retailers are required to do.

Jonathan Mail, Head of Public Affairs, Charity Retail Association