The government has now published its response to its IR35 review and confirmed, as expected, that the changes will come into force on 6 April 2020 as planned. Whilst the government recognises that there are outstanding concerns about its implementation, it considers that it has already taken various steps to address these. Key points to note from the government's report are:
- HMRC will take a light touch approach to penalties for errors relating to IR35 in the first year, except in cases of deliberate non-compliance;
- HMRC has restated its previous commitment that information resulting from the IR35 changes will not be used to open investigations into personal service companies (PSCs) for tax years before 6 April 2020 unless there is a reasonable suspicion of fraud or criminal activity;
- The government will bring forward legislation to require clients to respond to a request for information about their size from an agency or worker;
- The new rules will not apply where the client organisation is a wholly overseas organisation with no UK presence. However, note that this relates to the location of the client – moving the PSC offshore will not avoid the application of IR35;
- HMRC will continue its education and support for companies and contractors to help them comply with the new rules; and
- The government will review IR35 in 6 months.