IR35 changes are here

Apr 06, 2021

The off-payroll working rules in the private sector take effect today 6 April 2021, delayed from 6 April 2020 due to the pandemic. HMRC has written to us with an update on the ongoing work it is undertaking which is designed to help businesses and individuals prepare for the changes.  

“We're keen to continue supporting you and your industry in preparing for the reform, and would be happy to facilitate any discussions or briefings which might benefit your networks. If there are particular technical or practical aspects of the reform on which you think we might provide additional support, please let us know.  

Many businesses have already undertaken significant preparations to ensure they are ready for the reform, and HMRC is providing ongoing support for affected businesses and individuals by delivering an extensive programme of work to achieve that.  

  • We are continuing with our programme of webinars for businesses and individuals. Within this, we’ve followed stakeholder feedback on areas where additional information might be needed and developed topic-based sessions. 
  • We are running sector-specific workshops for those who might benefit from more detailed conversations.  
  • We have updated and improved our technical guidance.
  • We have produced factsheets to help taxpayers understand and prepare for the changes. 
  • We are commencing a programme of social media work to boost awareness of the reform and the education and support offer we have put in place. 

We are grateful for your assistance in in helping us raise awareness of our education and support offer in front of the businesses and individuals by disseminating them via your channels. Thank you for your support in this, especially given the particular pressures facing us all at the moment. We hope to continue working with you in this way. 

Looking forward, we are considering what education and support may be required from April as the reform beds in, and how the impact of the reform will be monitored. We are also planning to publish our compliance strategy in the near future.  

As always, we welcome any feedback or insights you would like to raise with us, and to discuss any aspects of the reform with you any off your networks; if a conversation, presentation or technical discussion would be of benefit, let us know and we will be happy to facilitate it.”  

On Monday 15 February 2021, HMRC also published its approach to compliance with the rules.

According to HMRC this:  

  • outlines HMRC’s approach to supporting organisations in applying the rules correctly and being compliant, and how HMRC will support them to do so;
  • provides information to affected organisations on how HMRC will work with them to ensure they are compliant. It reaffirms HMRCs previous commitments on penalties, historic returns and taking a supportive approach to ensure compliance;
  • Outlines some examples of how HMRC will support taxpayers to comply and the case studies provide operational examples of how HMRC will work with taxpayers; and 
  • Explains how HMRC will intervene where taxpayers deliberately do not comply, confirming that HMRC will step in where there is deliberate non-compliance. 

The briefing is not intended to cover the compliance approach for contractors; however, contractors may find it useful to understand how HMRC will ensure compliance with the off-payroll working rules.  

Further information about the off-payroll changes and how you can prepare can be found via the links below:-

HMRC has also sent us an update on the technical changes in the Budget to the off-payroll working legislation which are contained in Finance Bill 2021. The update from HMRC reads as follows:-

“These technical changes include:

  • A new provision to address the unintended widening of the definition of an intermediary, where it is a company. This provision states that the company will meet the conditions of an intermediary where the worker has a less than material interest, but only where the payment the worker will receive would not already be taxed as employment income. This means that umbrella companies, agencies and other third-party companies providing a worker’s services will not be in scope of the rules;
  • A Targeted Anti-Avoidance Rule (TAAR) to deter against arrangements devised to circumvent the definition of an intermediary to gain a tax advantage. This is in response to stakeholder feedback that some promotors may look for new ways to avoid the conditions;
  • Stakeholders also identified two further changes which would improve the operation of the rules. The first is a minor change to allow an intermediary to confirm if one of the conditions for an intermediary is met, where the worker has not done so. This will make it easier for client organisations to ascertain whether or not they need to consider the rules;
  • A further change to extend the consequences of providing fraudulent information to include any UK-based party in the labour supply chain. This means that, where someone other than the worker provides fraudulent information claiming that the rules do not apply, the subsequent liability will rest with that party instead of the client organisation or deemed employer.

These changes have been made under a Provisional Collection of Taxes Act (PCTA) resolution, meaning they will have effect from 6 April 2021, alongside the rest of the rules. Further details of the legislative provisions can be found here.

HMRC has published a Tax Information and Impact Note (TIIN) for these technical changes (on GOV.UK here). These changes will not have any additional impacts for engagements that were already in scope of the rules.

We have also published a revised TIIN for the wider reform, which updates the policy costing to reflect the one-year delay to April 2021, and contains a revised assessment of the administrative burdens on businesses. This can be found here.

Employment Status Manual (ESM) guidance updates

Today, we have also updated our Employment Status Manual (ESM) with further guidance on the off-payroll working rules. These updates include:

  • New pages to provide more details of the application of the technical changes outlined above;
  • A new page on how to calculate a worker’s statutory payment entitlement;
  • Updates to existing pages in response to stakeholder feedback and our education and support, which includes further details on when an SDS should be issued, what constitutes reasonable care, payroll processes and calculating statutory payment entitlements.
  • Various smaller changes to clarify sections of the guidance, based on ongoing feedback.

The ESM guidance can be found on GOV.UK at ESM10000.

HMRC is committed to continuing to work with stakeholders in the run up to and beyond the off-payroll working reform coming into force on 6 April 2021.  The updated guidance sits alongside our programme of webinars and workshops and other materials (on GOV.UK here) as part of our support to help businesses and individuals prepare. If you have any queries, please find our contact details on GOV.UK.”