All change for IR35 Contractors. HMRC are pushing ahead with the proposed changes to IR35 in the private sector, even though the consultation on reforming the off payroll working rules has yet to close.
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.
The guidance now published by HMRC advises four steps in preparation of the implementation of new rules in April 2020:
- Look at your current workforce (including those engaged through agencies and other intermediaries) to identify those individuals who are supplying their services through PSCs.
- Determine if the off-payroll rules apply for any contracts that will extend beyond April 2020. You can use HMRC’s Check Employment Status for Tax service to do this.
- Start talking to your contractors about whether the off-payroll rules apply to their role.
- Put processes in place to determine if the off-payroll rules apply to future engagements. These might include who in your organisation should make a determination and how payments will be made to contractors within the off-payroll rules.
It cannot be understated that the predominant risk with the implementation of these new rules is the retrospective application of the determined status.
If by applying these new rules and guidance it is determined that the working relationship is one where off-payroll working rules should apply, then surely it would have historical application, potentially going back years.
We have seen how HMRC are keen on retrospective application of rules, you only have to look at the current Contractor Loan Scheme for clarity on this.
In light of these changes we are likely to see both engagers and subcontractors alike, especially in the financial sector, taking a pragmatic approach and removing any exposure to this potential historical NIC liability by simply extinguishing long standing contractual relationships by the April 2020 deadline, thereby avoiding the requirement to asses the contract under the new rules.
If you would like to discuss your situation and how the new rules will effect you and can be mitigated, or indeed you simply need to know how the new rules should be applied, contact one of our qualified accountants today for a free consultation.
However you view this, it is essential if you are a contractor or a company engaging workers operating via a limited company, you must start to prepare now. If you do not plan for the introduction of these new rules, the ramifications could be catastrophic.
Book your FREE consultation today with one of our qualified Chartered Accountants or Tax Advisers.