At Offshore Commercial, we are committed to keeping our clients informed of key legislative changes that may affect their businesses. In this update, we would like to highlight an important change regarding the social security classification of certain company owners in Guernsey, which will take effect from 1st January 2025.
What’s Changing?
From 1st January 2025, amendments to the Social Insurance (Classification) (Guernsey) Regulations, 1978 will mean that individuals who are employed by and have substantial control over a limited liability company will be reclassified from self-employed to employed for social security contribution purposes. This amendment aims to align the social security rules with existing income tax regulations, simplifying the process for those affected.
Who Will Be Affected?
This change applies to those with significant control over limited liability companies who are currently classified as self-employed for social security purposes. If you fall into this category, you will need to ensure your payroll system is updated to reflect the new classification from 1st January 2025.
Transitional Period for Affected Individuals
For those who wish to remain classified as self-employed, there is a five-year transitional period available. However, to take advantage of this, you must make an election to continue being treated as self-employed by 31st December 2024. If no election is made, you will automatically be classified as employed for social security purposes from 1st January 2025.
To make this election, you must contact the Revenue Service at contributionsassessments@gov.gg before the deadline.
What Does This Mean for Your Payroll?
For many affected company owners, this change will simplify the handling of social security contributions, as it will now be aligned with the treatment of regular employees. It is important to ensure that your payroll system is updated in time to comply with the new regulations from January 2025.
From January 2025, business owners will have Class 1 employed contributions withheld from their salary by the employer at the Class 1 rate of 7.4%.
Next Steps
The Revenue Service is expected to provide further information on these changes shortly. They will also be sending letters directly to individuals who are likely to be affected by this reclassification. If you receive such a letter, it is important to review it and take any necessary action before the 31st December 2024 deadline.
You can view a copy of the letter here, and further guidance will soon be available on the States of Guernsey website.
Need Help?
If you have any questions regarding how this change might affect your payroll or require assistance in making the election to remain self-employed, please don’t hesitate to contact us at payroll@offshoregroup.gg. Our team is here to support you in ensuring your business remains compliant and that any necessary adjustments are made before the January 2025 deadline.
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