Latest update: IR35 and the private sector
As discussed in our previous posts in April 2019 and January 2020, the government intends to apply the IR35/off payroll reforms to the private sector in April 2020. By way of reminder, the IR35 reforms are intended to apply to any individual who, but for the supply of their services through an intermediary, would otherwise be an employee of the end-user client receiving the service. These rules will impact medium and large businesses in their role as the end-user client. From 6 April 2020, these organisations will become responsible for determining the employment status of contractors, regardless of whether they supply their services through a personal service company directly to the end-user or via an agency. The new rules will effectively see a shift in current responsibility on status determination, from the contractor to the end-user client.
By way of update, in early February 2020, HMRC provided some clarification about the new off payroll rules. In order to allow businesses more time to prepare for the changes, it has confirmed that the new regulations will only apply in respect of services provided on or after 6 April 2020, rather than any payments for services made on or after that date. Therefore, if any payments are made post-5 April 2020 for services that were provided pre-6 April 2020, they will not be caught by the changes. This is helpful clarification for end user clients who currently engage individuals via personal service companies – it means that there is an additional period in which businesses have time to prepare for the implementation of the new rules.
The formal publication of the review that has been conducted into the implementation of changes to the off payroll rules is due to conclude in February 2020, and it is hoped that it will bring some additional welcome clarification on the new rules for private sector contractors and end-user clients alike.
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