Do you have contractors working for you

Are you aware of proposed changes to the schedular payment regime which are expected to come into force from 1 April?

The following is a brief summary of these changes:


Variable tax rates

Contractors will be able to elect their own withholding rate without having to apply to Inland Revenue. Minimum rates apply: 10% for resident contractors and 15% for non-resident contractors or those with a temporary work visa. Most payroll software should be able to handle variable withholding tax rates.

If a contractor does not elect their own withholding rate then the standard rates set out in Schedule 4 of the Income Tax Act 2007 will apply. If a contractor does not provide their name and IRD number the withholding rate is 45%.


Exceptions

Withholding rates may be lower than the above minimum if a contractor holds a special tax rate certificate issued by Inland Revenue.

If Inland Revenue advises you that a prescribed withholding rate applies to an individual contractor this rate must be used.

The withholding rates for non-resident entertainers or sports people will remain at 20%. They are not able to select their own withholding rate.


Tax Notification form

Contractors will need to complete a new tax rate notification form instead of the current IR330 form. They only need to complete this if they want to change their tax rate or when they first start working for you.


Labour hire payments

If you are a labour hire business providing contractors to work for a client, the contractor payments will be subject to the schedular payment rules. The proposed standard withholding rate for this is 20%.


If you would like to discuss this issue with our advisers, please contact our office - give us a call or send us an email - we will be happy to help.

 

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