IR35: private sector off-payroll rules for contractors
15th July 2019This week HMRC have published draft legislation that will affect private sector personal services companies (PSCs) from 6 April 2020. PSC’s supplying services to medium or large-sized organisations will no longer decide if they are employed or self-employed, the end engager will assess this. If caught by these rules, known as IR35, employment taxes and National Insurance will be deducted before payment is made.
HMRC believes this will ensure fairness between individuals working in a similar way, following the success of the implementation of similar rules in the public sector in 2017. HMRC has confirmed they will focus on new engagements rather than reviewing past contracts.
HMRC have also agreed to enhance their Check Employment Status for Tax (CEST) tool https://www.gov.uk/guidance/check-employment-status-for-tax by the end of 2019. This would seem particularly vital in light of HMRC losing yet another case, against Talksport radio show host Paul Hawksbee, where the tribunal concluded the relationship was a contract for services and not of employment.
Lobby groups are attempting to stop this legislation, but it would be wise for businesses in this sector to take action sooner rather than later. Contract reviews and employment status audits can assist with planning working practices that are outside IR35.
Disclaimer - All information in this post was correct at time of writing.
