Things have moved on. Make sure you read our latest update instead, here’s the link.
The Government recently concluded its review of the proposed changes to IR35. Whilst there have been no material changes to the proposals, as a result of the review, we now know that the changes will definitely be coming into force on 6 April 2020.
We also now know that, during the first year of the new rules, HMRC will use a “light touch approach”. This means that penalties will not be issued to businesses as a result of inaccuracies relating to the new rules, but any business that deliberately fails to comply could still be charged.
Are you and your organisation prepared for the changes?
Our earlier update explained the background to IR35 and the proposed changes. In very broad terms, the IR35 rules ensure that where an individual (a contractor) provides services through an intermediary (such as a personal services company) to an end user client, if the contractor is in fact working like an employee, he/she will pay broadly the same tax as if he/she were an employee. Under the current IR35 rules it is an individual who must determine whether IR35 applies and it is the personal services company that must pay any tax due.
However, from 6 April 2020, it will be the end user client who will be responsible for determining whether the IR35 rules apply and in some cases for paying any tax and NICs on the sums due to the personal service company. In addition, there will also be new obligations on end user clients to assess contractors, make a Status Determination (“SD”) as to each contractor’s tax status, communicate the SD to relevant parties in a supply chain (including agencies) and put in place a dispute resolution process.
These new obligations are not straightforward and are likely to require clear risk assessments and use of the government’s CEST tool (available here) to help determine individual tax status.
Our team of IR35 experts can assist and advise you in relation to auditing your contractor arrangements, minimising risk, putting in place the relevant documentation and helping your business prepare for the changes.
Do get in touch with one of the experts listed below should you need any help with these issues.