IR 35 extension of Off-payroll working rules – April 2020 changes

Mar 09, 2020

 

Ahead of the changes to the IR35 rules from April 2020, which extend the off-payroll working rules to the private sector HMRC have sent the below communication in respect of the recent review of this legislation. This confirms that the changes are proceeding from April 2020, as planned.

 “I wanted to let you know that HMRC has today published the findings of the review into changes to the off-payroll working rules.

After engaging with stakeholders throughout the review process, as well as conducting internal analysis, the Government is making a number of changes to address concerns and support the implementation of the reform which is coming into force on 6 April 2020. These include:

  • taking a light-touch approach to penalties, and businesses will not have to pay penalties for inaccuracies in the first year, except in cases of deliberate non-compliance 
  • detailed guidance on the reforms published by HMRC
  • ramping up our communications efforts, including webinars and guides, to support contractors understand the rules. This will complement the significant work already in train to support businesses to prepare the Government reiterating that new information from the changes will not be used to open investigations into Personal Service Companies (PSC) for past tax years, unless fraud or criminal behaviour is suspected
  • assurances that the Government will introduce a legal obligation on organisations to respond to a request for information about their size from the agency or worker, to make it clearer who is responsible for determining the worker’s tax status.

We would be grateful if you could support us by sharing the messages with contractors and organisations who may be affected to ensure they understand the changes. To help you explain the reform to off-payroll working rules, we have published a stakeholder pack.

It provides:

  • an overview of the changes to the off-payroll working rules, including information in the form of case studies
  • communication resources, such as a draft email, a draft article and a social media call to action, which you will be able to tailor to meet your needs. Please use the products that are most suitable to you and your audiences
  • links to further support available, including guidance for the CEST tool and our contractor factsheet 
  • information about the webinars we will be running for contractors to give them an overview of the changes to the rules. Contractors can register for a webinar on GOV.UK.

HMRC’s guidance confirms that Status Determination Statements issued before 6 April 2020 remain valid under the extended ‘IR35’ rules. However, the updated guidance notes state that if the working practices of the engagement change, or a new contract is negotiated, the application of the extended ‘IR35’ rules to the engagement should be reassessed.

Last month, HMRC announced an amendment to the forthcoming changes. As originally drafted, the rules would have applied to any payments made on or after 6 April 2020, regardless of when the services were carried out. The new rules will now apply only to payments made for services provided on or after 6 April 2020. More detailed draft guidance on the new off-payroll working regime is available also.

The following publications may also be of interest:-