IR35 “Off-Payroll” rules to be extended to the private sector
Very controversially, the Government have decided to extend the rules for personal service companies in the public sector to workers in the private sector from April 2020.
This follows a consultation in Summer 2018 on how to tackle non-compliance with the intermediaries legislation (commonly known as IR35) in the private sector. The legislation which has applied in the public sector since April 2017 seeks to ensure that individuals who effectively work as employees are taxed as employees, even if they choose to structure their work through a company.
HMRC has since issued a consultation on implementation of reforms to the off-payroll working rules, which will be extended to the private sector from April 2020. The consultation provides useful detail on the intended scope of the reforms – which will impact both private and public sector organisations – and is intended to help businesses start preparing for reform. Draft legislation will be published this summer.
The consultation proposes new rules to deal with employment status disagreements which would apply to both private and public sector organisations.
The reforms will come into effect from 6 April 2020. Due to the complexity of many private sector companies, and the number of stakeholders involved in the required system and process changes, businesses should start preparing now. In many cases it can take up to 18 months to implement an effective strategy addressing cost, risk and talent management considerations.
This will represent a significant administrative burden on large and medium-sized businesses who will be required to decide whether the rules apply to payments to such workers and deduct tax and NICs.
For further information on IR35, please contact Alan Rolfe on 023 8046 1200.