HMRC has published a short advice note for private sector businesses ahead of the changes in April 2020 to the off-payroll working rules, better known as IR35. Similar changes were implemented in the public sector in 2017.
To help prepare large and medium sized businesses for the changes — which will not apply to small businesses — the advice encourages those that may be affected to start preparing now.
IR35 seeks to ensure that individuals who work via an intermediary but who otherwise work like employees, pay broadly the same employment taxes as employees. The most common means of working through an intermediary is for the individual to provide their services via a personal service company (PSC).
Under the current rules, the PSC is responsible for determining if IR35 applies and, if it does, will be responsible for deducting income tax and paying employer national insurance contributions. Once the new rules come in next April, these responsibilities transfer to the client engaging the PSC.
These changes shift the risk to the end-user client and will impact on the way many individuals and businesses currently work. As with most things, good early preparation should minimise the disruption when the changes are actually implemented next year.
The Government has made it clear that the changes will be coming into force, although there is still a consultation in relation to how the rules will be rolled out. The consultation ends on 28 May 2019.
From April 2020 the rules for engaging individuals through personal service companies (PSCs) are changing. The responsibility for determining whether the off-payroll working rules apply will move to the organisation receiving an individual’s services.