Review of changes to off-payroll working rules

10 January 2020

The Government has decided to launch a review of changes to off-payroll working rules in order to address any concerns from businesses and affected individuals about how they will be implemented.

Off-payroll working rules, known as IR35, were introduced in 2000 to ensure that someone working like an employee, but through a company, pays similar taxes to other employees (see Businesses warned to prepare for IR35 tax rules).

Reforms, announced in the 2018 Budget, are designed to tackle non-compliance with off-payroll working rules by making medium and large organisations in the private and third sectors responsible for determining the tax status of contractors.

The review will focus on the implementation of these reforms, which are due to come into force on 6 April 2020.

Financial Secretary to the Treasury Jesse Norman said: “We recognise that concerns have been raised about the forthcoming reforms to the off-payroll working rules. The purpose of this consultation is to make sure that the implementation of these changes in April is as smooth as possible”.

Responding to news of the launch, the Federation of Small Businesses (FSB) said that the review presents an opportunity to reassess flawed off-payroll legislation.

“We’ve already heard big corporations say they’ll pull the plug on contractors if planned changes to IR35 go ahead in April,” Chairman Mike Cherry said. “We have to remember that we’re in a global competition for talent. We need to make the UK a better, not more restrictive, place to do business.“

As part of the review, the Government has promised to hold a series of round tables with representatives of those affected by the proposed changes, including contractor groups and medium and large-sized businesses.

It will also carry out further internal analysis, including evaluation of the enhanced Check employment status for tax (CEST) tool and public sector bodies’ experience of implementing the reform to the off-payroll working rules in 2017.

Comment by Peninsula Associate Director of Advisory Kate Palmer

As it stands, April’s changes to off-payroll working rules are likely to place an additional burden on HR and payroll departments.

Therefore, given the concern among employers regarding the impending introduction of new IR35 requirements, it is unsurprising that the Government has announced plans to review these changes. After all, a review into the impact of IR35 on the private sector was promised as part of the Conservative’s election manifesto, in recognition of how some of the UK’s largest employers could stand to be adversely affected.

A review into the situation does not necessarily mean employers will be able to avoid these new requirements, especially as April is just a few short months away.

However, given the relatively high number of contractors used by private organisations when compared to the public sector, the Government may agree to adjust the obligations for private employers in the future.