Industry Insights / 28th Feb 2020

HMRC Review of IR35 Off-payroll Changes Published

HMRC have just published the outcome of the review into the extension of the IR35 off-payroll rules into the private sector on the 6th April 2020. It is still to be implemented on this date but with a more supportive approach for 2020-2021.

A summary of the full report and conclusions is below:

  • HMRC have confirmed that the reform will go ahead on 6 April 2020. However, the Government has identified a number of recommendations based on the findings of the review process.
  • HMRC have already committed to not using information resulting from the changes to the rules to open a new compliance check into Personal Service Companies for tax years prior to 6 April 2020, unless there is reason to suspect fraud or criminal behaviour. This should provide reassurance to individuals that any change in status as a result of the reform will not lead to HMRC opening a historic enquiry.
  • HMRC will ensure that customers trying to comply with the off-payroll working rules are not disadvantaged by those who are not. HMRC will focus on and address the most significant risks around non-compliance. HMRC will always follow up on suspected non-compliance if there is a sign of potential criminal activity.
  • To deliver this supportive approach in 2020-21 specifically, HMRC will take a light touch approach to penalties. Customers will not have to pay penalties for inaccuracies relating to the off-payroll working rules in the first 12 months unless there is evidence of deliberate non-compliance.
  • A common issue raised over the course of the review has been businesses’ concerns over when the rules will begin to apply to payments. Businesses were concerned that the existing legislation would catch contracts for services provided before April 2020 but invoiced after the rules came into effect. Businesses reported that this was having an immediate impact on their decisions about contracts.  The Government has listened and taken action early to give businesses certainty, announcing on 7 February 2020 that the rules will now apply only to payments made for services provided on or after 6 April 2020.
  • The Government will bring forward legislation in Finance Bill 2020 to place a legal obligation on clients to respond to a request for information about their size from an agency or a worker. HMRC will also update the guidance to support clients to understand their obligation. 

Although these changes are welcome, IR35 remains a complicated issue. If your company does not want to add any contractors to their permanent payroll, an alternative is to add the contractors to an agency’s payroll such as that offered by Talent Search. This ensures that the contractor pays the correct amount of PAYE and NI and mitigates the risk of an IR35 investigation for the company.

Please refer to our previous blog for more information on this topic:

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