The government’s initial review of the proposed changes to the off-payroll working rules is due to complete in mid-February.
The proposed change which is due to come into effect in April 2020 will extend the “off-payroll working” rules from the public sector to medium and large companies in the private sector. From 6 April 2020, clients/end users will be required to make a status determination – whether a contractor providing services through a “personal services company” (PSC) is inside or outside IR35. At the moment, in the private sector, it is the PSC which makes this status determination. Where the determination is that the contractor is “inside IR35” they are a “deemed employee” for tax purposes. Payments to the PSC trigger PAYE obligations, including the obligation to pay employer NICs at 13.8%. A determination of being inside IR35 is not intended to change the status of the contractor for employment law purposes.
The government’s review will focus on concerns which have been raised by companies and individuals, gathering evidence from both groups to ensure the smooth implementation of the reforms. The government will also consider whether there is anything else it can do to help organisations correctly determine individuals’ employment status for tax purposes. HMRC has already launched a new and improved online tool – the “check on employment status for tax” (CEST) tool – but we expect further changes to be made before April.