IR35 reform from April 2020

The Autumn Budget 2018 announced that the off-payroll rules in the public sector will be extended to the private sector; this will be delayed until April 2020:

“The government has carefully considered all of the responses received and we are now in a position to propose extending rules similar to the April 2017 public sector off-payroll working reform to the private sector. Having listened to concerns, the changes for the private sector will be introduced from April 2020 for medium-sized and large businesses only.”

Following the Budget, the ‘Summary of Responses’ to the consultation document was also released. There were 275 responses to the consultation from a range of stakeholders.

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Key Points

• Reform to off-payroll working in the private sector will be effective from 6^thApril 2020
  
  
• Reform will only impact those engaged to a medium or large client – the criteria will be similar to that defined in the Companies Act 2006, which requires two of the following criteria to be met:
  
  • Net turnover more than £10.2million
  • Balance sheet total more than £5.1million
  • Employs more than 50 employees

• There will be a further consultation to ‘refine the design of the reform’. The consultation will be released in coming months to inform the draft Finance Bill which is expected in Summer 2019. Amendments to the operation of the rules are likely to be made, which will apply to both private and public sectors.

• The reform is not retrospective.
  
  
• HMRC have confirmed in writing that where a contractor is deemed inside IR35 by their client, this will not automatically trigger an enquiry into earlier years, and they will not carry out targeted campaigns of this nature.
  
  
• To combat concerns raised over blanket determinations, the government will look to evaluate how businesses adhere to the ‘due care’ provision, how there could be consequences for failing to do so, and ensuring there are no incentives for making incorrect determinations.
  
  
• HMRC will work with stakeholders for CEST to be improved in advance of the new rules coming into force.

Considerations for private sector contractors:

• Until reform takes place, you will remain responsible for determining your own IR35 status. You should continue to assess your status with contract reviews and look to protect yourself against an enquiry.
  
  
• When engaged to a small business (a more concrete definition is expected prior to reform), the current rules will still apply.
  
  
• Don’t panic - the private sector has been awarded time to prepare. The further consultation for refining the operation of the new rules is expected in the coming months which may result in further changes.