The IR35 ‘off-payroll’ rules will be extended to the private sector from April 2020 onwards, directly affecting a large number of contractors. What exactly does this mean, and what can contractors and clients do to prepare in advance?
What does IR35 private sector reform mean?
The Intermediaries Legislation (IR35) has been around since 2000 – its core aim is to remove the tax advantages of providing services via a limited company for individuals who are not truly in business on their own account.
In other words, the rules are aimed at so-called ‘disguised employees’ – people whose working practices are more akin to those of traditional employees.
Despite various amendments to IR35 over the years, successive Governments have claimed that too many limited company owners are still illegitimately working outside the rules.
As a result, new ‘off-payroll’ rules were implemented in April 2017 for contractors working for public sector organisations. Instead of contractors themselves being responsible for determining their IR35 status, this obligation has been handed to the engager of each contractor, i.e. the client. Where a contractor is deemed to be ‘inside’ IR35, whichever part of the temporary worker supply chain pays the intermediary must deduct the required NICs and income tax from the contractor’s gross charge.
At the 2018 Budget, the Chancellor announced that the ‘off-payroll’ rules will be extended to most private sector businesses from April 2020.
The Treasury expects this new measure to net £1.3bn per year by 2023.
What happens next?
The widespread problems associated with the public sector rollout will no doubt have influenced the Treasury’s decision to delay private sector reform until April 2020 rather than 2019.
How will this affect my organisation?
Some workers may experience a lower rate of take home pay and negotiate a revised rate of pay in exceptional cases.
Your dedicated Business Partner will be able to offer advice and guidance on the likely impact that this legislation will have in terms of any impact on supply, demand or overall fulfilment. At the same time we will offer support with regard to your current contractor population in the preceding time before this legislation is introduced.
We will support our agency supply chain so they fully understand the potential impact of this legislation on each distinct category of supply. This will also be influenced by further guidance that has yet to be released by HMRC.
Detailed guidance will be provided to all customers on how our managed service will be able to fully support you prior to the introduction of this legislation. This will include a way in which we can help to manage the process of deeming roles in scope of this legislation and that it fully meets all governance and compliance requirements once confirmed by HMRC.
For more information please forward all enquiries to IR35@comensura.co.uk or complete the form below.