IR35 – Government announces review
In our Summer 2019 newsletter, we looked at the changes to IR35 that are due to be implemented in 2020 (IR35 changes). IR35 rules focus on those individuals who operate as independent self employed contractors but actually work like employees and the rules aim to ensure such individuals pay tax and NI in line with employees. Originally the onus was on the individual to decide if they were caught within the scope of IR35.
In 2017 the government, to combat what it believed to be widespread abuse of the rules, introduced changes in the public sector which put the onus on the organisations who contracted with the individuals to decide whether the individual was caught within the scope of IR35. These changes are set to be rolled out to the private sector in April 2020.
In November 2019 the chancellor, Sajid Javid, promised a review of the changes with a focus on the best ways to implement them. This was in response to concerns raised by many contractors.
It was therefore welcome news on 7 January 2020 that the Government formally launched a review of the changes to the off-payroll working rules (more commonly known as IR35). The review will focus on any additional support that will be needed to ensure self-employed individuals are not impacted by the changes.
The Government states it will gather evidence from affected individuals and businesses to ensure a smooth implementation of the reforms. It will do this by a series of roundtables with stakeholder representatives. It will also undertake internal analysis and evaluate the process for checking your employment status for tax (CEST) which is operated by HMRC.
The timetable is tight with the Government committing to concluding the review by mid-February ready for implementation of the new rules in April 2020.
In addition, the Government has also initiated a separate review focusing on how it can better support the self-employed workforce. This will include improving access to finance and credit, making the tax system easier to navigate and examining how better broadband can boost homeworking.
What can we take from this announcement?
The Government review is welcomed but the timescales clearly underline that the intention is still to implement the IR35 changes in April 2020.
It is essential that employers who engage contractors, understand the changes and how they may affect these relationships.
We will be hosting a breakfast seminar on 5 February 2020 to advise businesses on how they can limit their exposure to a HMRC challenge. To book your place email firstname.lastname@example.org.