The new regulations coming into force from 6th April aim to make a level playing field between those who are directly employed or via a Personal Service Company (PSC) so that income tax and NIC payments are the same and remitted as required. The changes won’t affect all contractors, as they are aimed at medium or large sized companies in the UK, but it will if sub-contractors are given the status of ‘deemed employee’. The end client company will be responsible for assessing the employment status and deciding if the sub-contractor should be treated as an employee or as self-employed for tax purposes. If it is decided that there is an employment relationship, they will need to deduct income tax and NICs from the income to pay HMRC directly as per PAYE.

This is currently the worker and the PSCs responsibility but HMRC report that less than 10% complied with their responsibilities. These changes could affect up to 170,000 individuals who would be employed if engaged directly.