Off-Payroll Working (IR35) Review Conclusion

HM Treasury has published its “report and conclusions” from their review into the implementation of the changes to the off-payroll working rules. The report confirms the reform will go ahead on 6 April 2020.

These are the rules that will require all medium and large “end users” in the private sector to consider if the corporate contractors they use are caught by the IR35 regulations. They also require the fee payers to deduct employment taxes and National Insurance from the payments to these corporate contractors as well as paying employers National Insurance themselves. This brings them in line with the requirements already in place for all public sector bodies.

This report will come as a blow to the contractors and recruitment agencies who have been campaigning for a delay and full review of these rules. Whilst there is still a House of Lords enquiry to be published shortly, it seems highly unlikely that the introduction of these rules will now be delayed.

The positives to come out of the review are:

  • A commitment that taxpayers will not have to pay penalties for errors in the first year, expect in cases of deliberate non-compliance.
  • Further confirmation of HMRC commitment to not opening new investigations into PSC for prior periods, unless there is reason to suspect fraud or criminal behaviour.
  • Confirmation that these rules will only apply to services carried out from 6 April 2020 onwards, effectively delaying the impact by around a month in most cases.
  • The government will also place a legal obligation on “end users”/clients of agencies or workers, to provide full detail of their size
  • They have also addressed some of the concerns around how the rules apply to offshore companies.