We have reported numerous times on off-payroll working rules, known as IR35, which aim to ensure that someone working like an employee, but through a company, pays similar taxes to other employees.
Most recently, we reported that the Government had decided to launch a review of changes to the rules (see Review of changes to off-payroll working rules) and it has now launched the promised consultation.
Available at https://www.gov.uk/government/consultations/draft-secondary-legislation-off-payroll-working-rules-from-april-2020, this seeks views on the technical detail of this draft secondary legislation, which is due to come into effect from 6 April 2020.
The draft legislation has been produced by HM Revenue & Customs (HMRC) and will mean that changes will shift responsibility for operating the rules from the worker’s company to the medium and large-sized organisation they work for in order to improve compliance.
Effectively, this will extend the rules that already apply to the public sector.
To work out whether the rules apply, the person or organisation receiving an individual’s services (the client) will be responsible for making a decision about whether the worker is employed or self-employed for tax purposes.
This is known as an “employment status determination” and it should be noted that small organisations will be exempt from considering whether the rules apply.
HMRC has made available, at the above link, a technical note about the consultation together with the (Draft) Income Tax (Pay As You Earn) (Amendment) Regulations 2020 and the (Draft) Social Security Contributions (Intermediaries) (Miscellaneous Amendments) Regulations 2020.
Responses to this consultation will be reviewed and the draft regulations will be revised as appropriate before they are laid before Parliament. The deadline for submitting comments is 19 February 2020.
Comment by Croner Associate Director Paul Holcroft
This consultation likely comes as welcome news to employers who may have been concerned over what the new IR35 rules would mean for their company come April.
I would caution them not to get too complacent here.
After all, we do not know what amendments, if any, will be made to the upcoming rules and the Government has already confirmed that there will not be a last-minute U-turn on them.
To this end, employers must prepare for these changes over the coming months.
Last reviewed 27 January 2020