What is the issue?
New rules due to come into force from April 2020 mean that medium and large companies* engaging NEDs (including Chairmen) who invoice for their services via an intermediary (most commonly their own Personal Service Companies or “PSCs”) will need to operate PAYE and NICs on fee payments made to them **. In advance of these rule changes, businesses will need to think critically about how they communicate with their NEDs.
These changes may impact a NED’s personal tax position and shine a light on their own tax affairs, where they may not have been considering the current IR35 rules.
The new rules overview - April 2020
Since changes were introduced in the Finance Act 2013, NEDs working via a PSC have been within the scope of the IR35 rules and PAYE is payable by the PSC. This is providing the contractual arrangements and payments are between the engaging company and the PSC (otherwise the ‘end user’ of the service should operate PAYE).