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In 2020, the UK government announced that reforms to the off payroll working rules (IR35) would be postponed until 6 April 2021 due to the pandemic.

HMRC introduced IR35 (aka the ‘off-payroll working rules’) in April 2000 to legislate what it calls ‘disguised’ employment.

The name IR35 originates from this press release published at the time by HMRC.

So what is IR35?

IR35 assesses whether a contractor is a genuine contractor as opposed to a ‘disguised’ employee, for tax purposes.

IR35 are 2 sets of anti-tax avoidance legislation, designed to combat tax avoidance by employers and contractors who supply services to their clients via an intermediary, such as a limited company, but who would otherwise be deemed as an employee if the intermediary was not used.

IR35 seeks to limit contractors and their clients taking advantage of tax rules by working in a self-employed style, when they should be deemed employees.

We’re a small company. Does IR35 apply to us?

New IR35 rules apply exclusively to private sector medium-large sized businesses and all public sector companies. By virtue of the Companies Act 2006 provisions, small private sector businesses are exempt from the IR35 rules.

How do I know my business is classed as ‘small’?:

  • Annual turnover must be less than £10.2 million;
  • Balance sheet total must be less than £5.1 million; and
  • You have up to 50 employees

I am a contractor working for a public sector/large private sector business. What does this mean?

  • Under IR35, you must pay the same tax as you would if you were an employee. You may also be entitled to additional employee/worker rights (e.g. minimum wage, maternity pay, discrimination protections)
  • You will also have to pay a ‘deemed employment payment’ when the current tax year elapses, to account for any tax deductions or NIC that an employee would have paid. Work out what you owe here

I operate as a business and am therefore outside of the IR35 rules. What does this mean?

If you operate as a genuine business, you are outside of the IR35 rules. Some indicators that you fall outside of IR35 include:

  • You can pay yourself a salary
  • You can withdraw further income as dividends (not subject to NIC) whilst your limited company pays tax only on its profits at the corporate 20% rate
  • You have your own business insurance
  • You own your own equipment
  • You market yourself using a professional website
  • You work with multiple clients

What do the IR35 changes mean?

In 2000, when IR35 first came into force, contractors were responsible for assessing their own IR35 status; it was the individual’s limited company/agency who had responsibility for accounting for any tax and NIC due where IR35 was applicable.

From April 6 2021, responsibilities for determining IR35 status and paying relevant tax will be passed from contractors to the private sector businesses engaging them – to align with the public sector.

Should HMRC decide status has been incorrectly assessed (operating inside IR35), the businesses will be held liable rather than the contractor.

IR35 private sector reforms exclude small business’, meaning contractors who engage their services will have to set their own IR35 status.

IR35 applies to me. What do I do?

You will have to pay the extra income tax and NICs. To find out your employment status for tax click here

To find out how much you will have to pay, click here

Also:

  • Keep an eye on the news for any related updates
  • Ensure to maintain consistent assessments of your engagements
  • Pay your tax and NI relevant to your status and keep records of payment
  • Make sure the work you provide complies with your written agreements
  • Review your IR35 status if anything about your working practices changes
  • Keep due diligence records
  • Ensure communication and agreement with your contractors

Please note that this article is purely advisory, and the official government IR35 guidance is available here. Please give us a call on 0161 603 2156 if you have any further queries for anything HR or health and safety related, we will be happy to assist.

Case Spotlight: Northbay Pelagic Ltd v Anderson

In the recent case of Northbay Pelagic Ltd v Anderson, it was held at the Employment Appeal Tribunal (EAT) that the Employer’s decision to dismiss the employee, because the employee had installed a surveillance camera at work, was in fact unfair.

The complainant was a director and employee of the company, a fishing business, and relations between himself and other Directors had broken down.

In 2016, Mr Anderson was put on suspension for disobeying a reasonable management instruction, and subsequently dismissed for gross misconduct then removed as a director from the company.

There were various grounds given for his dismissal, including failure to follow management instructions and also that following the initial suspension, Mr Anderson had installed a surveillance camera inside his office. A claim was brought at the Employment Tribunal for unfair dismissal.

The tribunal considered that around the time of dismissal, Mr Anderon had raised suspicions around another Director that had sought access to the complainant’s computer password.

Tribunal Decision

The tribunal held that the complainant suspicions were reasonable; by setting up the surveillance camera, Mr Anderson had taken measures to see if his personal data was being accessed without his knowledge or consent. The camera was found not to be covert as it covered both the complainant’s office and another office next door, and also because there was other CCTV in the office building.

The Employment Tribunal upheld the claim and decided that Mr Anderson’s dismissal was unreasonable, as the camera was not covert, so using the camera as a reason for dismissal was not a reasonable ground.

The employer put in an appeal to the EAT and argued that the ET had decided that the dismissal was unfair instead of viewing the fairness through the eyes of the employer. The appeal was rejected, as it was held that the complainant’s actions were demonstrative of him trying to protect his interests as an employee, a director, manager and a shareholder of the business.

The Appeal Tribunal held that the privacy of the other staff in the office was not threatened by the installation of the camera, as there was no evidence of other staff being caught on camera, and it was only those who were trying to access Mr Anderson’s office that were captured on the camera.

Northbay failed to fulfil its obligation to balance the complainant’s interests in protecting his confidential information with the other staff’s privacy rights, the EAT found.

The EAT disagreed with the initial tribunal’s reasoning that the camera was not covert. However, the EAT upheld the decision that the dismissal of Mr Anderson fell outside the band of reasonable responses.

Mr Anderson’s failure to follow a management instruction was remitted to a fresh tribunal to reconsider.

Implications for Employers

If an employee installs a covert camera at the workplace, this could amount to serious or gross misconduct and/or breach of the implied term of confidence and trust between the employer/employee.

Careful investigation into the employee’s reasons for the covert surveillance must be undertaken by the Employer in these instances, for example if the employee has evidence that their privacy was at risk of being breached.

Employers should not jump straight to summary dismissal if a covert camera is found. Instead they should weigh up the employee’s interest to protect confidential information against its own interests, including the privacy rights of other staff, before deciding to dismiss.

While every case is dependant on the facts, Employers should approach this topic with caution; where the risk to privacy of other employees is negligible, a dismissal for gross misconduct may not be justifiable.

Further Advice

If you need any advice on this topic, or anything else HR-related, please give us a call on 0161 603 2156 today for a free, no-obligation chat around how we can protect your business.

Now that it has been nearly a year since the pandemic began to spread in the UK and lockdown was implemented, we are starting to see some coronavirus-related judgements come through the Employment Tribunal system.

In the recent case of An Operations Coordinator v A Facilities Management Service Provider, a worker resigned after raising complaints around safety in the workplace and her request to work remotely during the pandemic was rejected. The Irish WRC found constructive dismissal was proven.

This is a first-instance ruling, handed down in a different jurisdiction however, it’s an early example of a covid-related claim that many UK employers will likely be facing over the next few months and beyond.

This is decision is confirmation that when management turn down requests to work remotely where this is a possibility, they could later face claims for discrimination and constructive dismissal.

It is so important that management ensure that your workplace have:

  • consulted individually and collectively over changes (including the possibility of homeworking);
  • carried out a COVID workplace risk assessment and mitigated any risk; and
  • put in place a safe working during the pandemic policy.

If you need any further advice, or you don’t have any of the above clearly in place, give us a call on 0161 603 2156 for a free, no-obligation discussion on your workplace practices and policies.

While LGBTQ+ rights have continued to improve over the years, there is more work to do to tackle inequality

We’ll keep playing our part in fighting against discrimination in all forms, promoting equality and diversity, with aim to:

  • Increasing the visibility of lesbian, gay, bisexual and transgender (“LGBTQ+”) people, their history, lives and their experiences in our workplace culture and the wider community;
  • Raising awareness on matters affecting the LGBTQ+ community;
  • Working to make educational and other institutions safe spaces for all LGBTQ+ communities; and
  • Promoting the welfare of LGBTQ+ people, by ensuring that our workplace recognises and enables LGBTQ+ people to achieve their full potential.

There are a wealth of resources to help educate and raise awareness at https://lgbtplushistorymonth.co.uk/

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The Equality Act 2010 provides that employers are prohibited from discriminating against employees based on their gender or sexual orientation.

A Stonewall study found that over a third of LGBTQ+ employees fear potential scrutiny and negativity so choose to hide their sexual orientation in the workplace.

Management need to convey a clear message around the importance of diversity to help LGBTQ+ employees feel more secure at the workplace.

Key steps that organisations can take include:

  • Distribution of an inclusion and diversity policy outlining how outdated stereotypes will be challenged
  • Promoting equal opportunities for LGBTQ+ and other minority employees
  • Setting specific targets (for example the BBC aim to increase their LGBTQ+ workforce through changes to recruitment processes)

Employers have legal obligations to protect the health, safety and wellbeing of their employees and should take into consideration how LGBTQ+ employees are being treated at work. It could be that your business has a culture that allows ‘office banter’ that is in fact classed as bullying or harassment.

Employers need to be aware that they can also be vicariously liable for these workplace situations even if they did not know about them. Significant compensation claims can arise from bullying and harassment; so employers must ensure they implement and maintain a zero tolerance approach to this issue and all accusations are fully investigated. Management should also make clear that any acts of misconduct in this area will be met with disciplinary action.

Holding regular and compulsory equality and diversity training to further promote awareness is also advisable, this could be part of an induction process or from time to time. Management should be fully competent in responding to the needs and requirements of every employee.

Employers should also consider implementing open forums to invite any concerns or suggestions from employees to be shared confidentially. Through this, management will be able to process and understand employees’ views, identify areas for improvement, and help to reassure the workforce that their comments are being addressed and taken seriously at a senior level.

HMRC has confirmed that employees with childcare responsibilities can be put onto the ‘furlough’ scheme if they are unable to work due to school closures and thus having extra childcare and homeschooling responsibilities.

The Check which employees you can put on furlough guidance has recently been updated to reflect that you can furlough employees who:

  • have caring responsibilities resulting from coronavirus, such as caring for children who are at home as a result of school and childcare facilities closing, or caring for a vulnerable individual in their household.

This latest update to the scheme appears to have provided a resolution to previous confusion around whether working parents affected by school closures were eligible for the furlough scheme.

The furlough scheme currently runs until the end of April 2021. The Trades Union Congress has pleaded with Employers to furlough struggling parents so they do not have to juggle work and home-schooling responsibilities. The furlough scheme offers a sensible alternative to unpaid leave or reducing staff hours, whilst ensuring that parents can utilise the hours in the working day to ensure children that are currently disallowed into schools are monitored, cared for and educated at home.

HR Magazine reports that some UK firms are even starting to offer fully-paid “lockdown leave” to help ease the pressure off working parents, and increasing leave allowance for staff who are juggling childcare and work.

If you have any HR queries, please give us a call on 0161 603 2156 and our friendly team will be happy to help!

It has recently been announced by Chancellor of the Exchequer Rishi Sunak that the national living wage (NLW) annual increase will include 23-year olds from April 2021.

This is an increase of 2.2% from the current rate of £8.72 to £8.91 and the increase will come into effect from 1st April 2021. This will mean employees earning the minimum wage currently, will see a rise of nearly 9%.

Sunak said of the change: “Taken together, these minimum wage increases will likely benefit around two million people. A full-time worker on the national living wage will see their annual earnings increase by £345 next year. Compared to 2016, when the (NLW) policy was first introduced, that’s a pay rise of over £4,000.”

The labour government first introduced the National Minimum Wage in 1998. Prior to that, there was no official ‘minimum wage’, although there had been a battle from trade unions to introduce such a rate. The NMW was re-branded as the National Living Wage for those over 25 in 2016. It is perhaps not surprising that the threshold age of 25 has already been lowered to 23 only 5 years later, as a rise in inflation and living costs has meant that the living wage was no longer sufficient.

The pandemic has also shed a light on the importance of the work of key workers, such as those in food retail and hospitality, many of whom are students and those under 25 and will be sure to benefit from this rise in pay.

It is extremely important that as an Employer, you are paying at least the National Minimum Wage. If you think that this is not the case, you should seek to rectify this immediately.

Are there any workers who don’t qualify for the National Minimum Wage?

Yes, they include:

the self-employed;

voluntary workers;

company directors (unless they are under a contract that defines them as a worker).

If you have any queries on the National Minimum/Living wage, please give us a call on 0161 603 2156 for confidential advice.

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