It is tempting to think that there is only one crisis, that caused by the coronavirus. Talk of it is pervasive, whether that be on calls with our colleagues or standing on the touchline watching our children play sport. We cannot escape from it. Many will have stopped this week to hear the PM and the Chancellor make their respective announcements.
There are two more crises looming for tech businesses. Brexit has very much been pushed to the side-lines, however, the transition period is rapidly coming to a close and with it the free movement of people (and data) across Europe.
A little, but not much, further ahead are the troubled waters of IR35.
Impact on employees
Cautiously, perhaps somewhat timidly many of us in September were contemplating a return to an office environment if not on a full-time basis perhaps once or twice a week. Working remotely has been possible thanks to various forms of video communication and other apps. Lockdown and the restrictions on movement in the summer months were perhaps not too burdensome for many because there was the possibility to get outside and enjoy the weather. With cold weather arriving and nights drawing in, this winter will prove difficult for many.
Managers and HR teams will need to be equipped with the tools necessary to recognise when employees are suffering fatigue / burn out. Stress and depression are likely, alongside the virus, to have an impact on employees’ productivity. Now more than ever managers need to be alert to changes in employee’s behaviour, staying connected with them and being available to provide and offer support.
Some have taken advantage of the virus’s impact and continued working whilst staying in various European cities whilst still working during the day, but enjoying the night-time culture of those cities. Given the ability we have all learned that we have many businesses may be considering hiring employees working remotely or even overseas. Some employees may want to go back to their families rather than being forced to quarantine away from them over Christmas.
Where businesses are considering recruiting foreign workers or allowing employees to work remotely from outside the UK it is important that before agreeing to any form of arrangement they consider the tax, social security and employment issues. Up to 31 December 2020 the position, in Europe, is more straightforward but after 31 December 2020, for those working in Europe the tax and social security position will be governed by the agreements in place between the UK and the host country. If that is not considered properly at the outset there is the prospect of double taxes being paid. Equally, if employees work in a foreign jurisdiction they may not only have employment rights guaranteed by that country but also be entitled to additional, unconsidered benefits.
Whilst the press talk may be on the 600 mile lorry park that Kent is to become, there are real issues of concern for tech businesses.
The first issue that business need to secure is the continued ability of the UK based workforce to continue to work in the UK. Businesses should urgently be conducting an audit of their staff to understand (i) whether members of their workforce need to apply under the EU Settlement Scheme; (ii) whether they have applied and then monitor to ensure applications are made well before 30 June 2021; (iii) consider if they need to apply for a sponsor licence for potential new workers coming from outside the UK after 31 December 2021, or whether other immigration routes should be explored. Whilst businesses can wait until the need arises the process is time and labour intensive and will slow down any potential recruitment.
The new immigration regime has advantages over the existing rules, having removed the need to conduct the resident labour market test, saving at least four weeks in any recruitment process and reducing the skill level required for roles from degree level to A level.
For an economy that has thrived on data and which has enjoyed the benefits of being within the EU the coming months present a significant risk. Without an agreement the ability of businesses within the EU to transfer data to the UK may well be restricted. Without an agreement and therefor an adequacy decision EU businesses will have to find another legal basis for data exports to the UK. Whilst the UK believes its data protection laws meet EU standards, being based on GDPR the Schrems II decision has raised concerns about the manner in which the UK government gathers and there is a case pending before the ECJ. Given that challenge there is a real prospect that an adequacy decision may be withheld another legal basis has to be found to transfer data.
Standard Contractual Clauses (“SCCs”) may be the best option to take, but even their adequacy was doubted in the Schrems II decision. If SCCs are invalidated then the outlook is fairly bleak. Encouragingly the European Data Protection Board has said it will provide more guidance on the use of SCCs and binding corporate rules and is considering other supplementary measures that can be put in place.
Whilst the picture is not clear those responsible for data transfers need to consider what protective measures they are going to put in place to ensure that the free flow of data can continue from the EU to the UK and also from the UK to the USA.
Many will already have considered the impact of the proposed changes to the rules involving consultants working through their own personal service companies (“PSC”) in the run up to the proposed changes in April 2020, before they were shelved for 12 months in the light of the pandemic.
The proposed changes to the consulting regime make the end user responsible for determining the status of the consultant for tax purposes and passing that analysis down the supply chain to ensure the appropriate tax treatment is applied by the fee payer, which is the last entity in the supply chain before the consultant’s PSC. Having undertaken status determination the end user is required to issue a Status Determination Statement and pass it down the supply chain until it reaches the fee payer. If the SDS indicates that the consultant would, but for the PSC, be an employee of the end user the fee payer must deduct tax and national insurance contributions and pay employers’ NIC at 13.8%.
It is important that end users and those in the supply chain know and understand their responsibility with regard to the status determination exercise which must be carried and their potential liability for getting it wrong. It will also be important that all parties understand the position when it comes to pricing, given that there may be an additional liability to pay NICs which has not arisen before. For end users not undertaking appropriate SDS leaves them responsible for deducting tax and NICs and paying employers NICs.
When the off payroll rules fee payers will need to understand that they have to pay the invoiced amount through the payroll under the name of the individual concerned but pay the net amount to the company. Fee payers will need to ensure that they have appropriate systems in place to deal with this process correctly.
These are challenging times. There are many issues to consider and to plan for. For more assistance with any of these issues please do not hesitate to contact the team by email at [email protected]