IR35 latest news and developments
Posted on 13th February 2020 at 08:36
There have been a couple of updates in the ever-changing (and still as confusing as always!) world of IR35 in the past week.
Off-payroll working rules (IR35) were introduced in the year 2000 to ensure that people who work as contractors through their own limited companies pay the same level of Income Tax and National Insurance Contributions as employees. Following a reform to the rules in April 2017, public-sector organisations who took on contractors became responsible for ensuring that both they and the workers they engage were paying the correct amount of tax, which has been an effective method of improving tax compliance.
At the Autumn Budget in 2017, the government revealed its plans to start a similar plan for tackling non-compliance in the private sector. A year later, during the Autumn Budget in 2018, it was announced that plans for the reform would be extended to medium and large organisations, and the changes would kick in from April this year.
So what’s happened?
HMRC announced at the back end of last week that changes to the operation of the off-payroll working rules will only apply to payments made for services provided on or after 6 April 2020. Previous to this announcement, it was the understanding that the rules would have applied to any payments made on or after 6 April 2020, no matter when the services were carried out. This new development now means that affected organisations will only need to determine whether the rules apply for contracts they plan to continue beyond 6 April 2020.
In short, this essentially means that the new IR35 rules are only applicable to contracts that are delivered in the new tax year i.e. on or after 6 April 2020.
Many off-payroll contracts are currently in the middle of being terminated while companies engaging contractors are attempting to reduce the risk of becoming liable for the income tax and NICs that would have previously been the contractors’ responsibility.
You can read the full details of this new update here in HMRC’s Employment Status Manual.
The Lords Select Committee invites contractors to its new IR35 inquiry
The Lords Finance Bill Sub-Committee has announced it will investigate the proposed extension to the proposed new IR35 legislation and called on both contractors and businesses impacted by the reform to contribute to the inquiry.
Lord Forsyth of Drumlean, Chair of the Finance Bill Sub-Committee, said the Committee is “The government is proposing to extend the off-payroll working rules to large and medium-sized organisations in the private sector” and that the Committee is “interested in how this change will work in practice, and how it relates to wider changes in working arrangements.”
The probe will focus on whether the government has sufficiently evaluated the impact of the extension of the IR35 rules to the private sector and, in particular, whether the assessment that has been made of the compliance burden realistic.
It will also consider the effect the new legislation will have on contractors and subcontractors, and what HMRC should be doing to assist businesses to fully understand the new system – of course, there have been many pushbacks on IR35 regarding the difficulties in fully grasping the rules as they are.
Furthermore, the Sub-Committee will be investigating whether the tests for determining employment for the purposes of these new rules is clear to both the business engaging the contractor, and the contractor themselves.
Fundamentally, the inquiry is being held to ensure that the overall objectives of the new IR35 rules are being reached most efficiently by way of introducing this new legislation, or whether something more straightforward could be done, and whether the bill will actually achieve the Government's objectives or not.
The deadline for the submission of written evidence is 25 February 2020 – click here to find out more.
Get your IR35 Private Sector: 5-Step Action Pack now!
Nicola and the team at Effective Accounting have been preparing for this for close to a year. We are fully prepared to work with contractors to help you to understand the changes, navigate the complex world of IR35 and in your communications with your client.
Make sure you're one step ahead and get your IR35 Private Sector: 5-Step Action Pack now. Learn more here.
For just £297 + VAT, you will get:
Full written IR35 Contract Review;
30-minute debrief call with Nicola to discuss the outcome of the IR35 Contract Review and its impact on you and your limited company;
Communications Pack including email and letter templates to send to your client to get your communications started, and in the event that you need to appeal;
30-minute call to discuss your very own action plan.
Be proactive, take the initiative and get planning for April 2020!
Nicola J Sorrell
- Effective Accounting
Founder | Xero Champion | IR35 Expert
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