Off-Payroll Working Rules: 11th hour reprieve?

16th January 2020

Those personal service companies working in the private sector (referred to, variously, as freelancers, consultants or contractors) should now be aware that new tax rules will apply to them with effect from 6-Apr-20.  These rules, off-payroll working, aim to finally clamp down on the abuse of the Inland Revenue Press Release number 35 tax rules (IR35) that have been with us since 2000. As these changes will, typically, increase the tax these businesses pay by around £10k pa, they are proving highly controversial. Of particular concern to those affected is that these rules were designed to only increase the tax take from those that are, effectively, ‘disguised employees’. What is happening, however, is that end clients, who now take over the responsibility for making the status assessment, are de-risking their exposure to potentially getting their tax administration wrong, by either, treating all of their limited company labour as being caught by these new rules, or by moving all of this labour over onto an umbrella or similar service provider. So those genuinely running a business on their own account are unfairly also suffering the tax consequences.

 

Perhaps in response to the lobbying of these concerns, the Chancellor has now announced a review, with the conclusions of this review to be published by mid-February.

 

With this review and the 11 March Budget falling so close to the planned implementation date for these new rules, this leaves little time for change. One can only speculate on how tempting it must be for Messrs Johnson and Javid to announce a u-turn or delay on this.

 

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