Major changes: Updates from HMRC on IR35 in the private sector

Since the announcement to extend the updated IR35 legislation to the Private Sector,  HMRC has been battling against a number of calls to delay and concerns raised by businesses across a variety of sectors.

Due to the current situation surrounding the Covid-19 outbreak, the Government has decided to delay the implementation of the IR35 reform in the Private Sector for one year. During an announcement made 17th March, Steve Barclay, Chief Secretary to the Treasury, confirmed the off-payroll reforms will now be postponed until April 2021.

To ensure you are kept up to date with the changes, here is a summary of the most recent updates.

Implementation of IR35 reform in the Private Sector to be delayed until April 2021

Announced 17th March 2020

In an announcement to the House of Commons, Chief Secretary to the Treasury, Steve Barclay said:

“This is a deferral in response to the ongoing spread of Covid-19 to help businesses and individuals.

This is a deferral and not a cancellation, and the Government remains committed to reintroducing this policy to ensure people working like employees but through their own limited company pay broadly the same amount of tax as those employed directly.”

Review of changes to the off-payroll working rules: report and conclusions

Published 27 February 2020

Following the conclusion of the Government’s review of the changes to the off-payroll working rules, the response including report and conclusion, has now been published.

Policy changes 

The review has confirmed:

• There is a legal obligation to be placed on all clients to confirm their business size, and therefore, whether the off-payroll rules apply, when asked by an agency or a worker.

• Where the client of the services is wholly overseas, with no subsidiary or presence in the UK, the new off-payroll rules will not apply, and the obligation to determine tax status moves back to the contractor’s limited company.

• The new rules will now apply only to payments made for services provided on or after 6 April 2021. In line with the announcement made 7th February 2020.

HMRC’s compliance approach to the reform of the off-payroll working rules

HMRC also released their compliance approach to the 2020 reform of the off-payroll working rules, which includes an outline of how businesses will be supported throughout the 2020-2021 tax year. 

As outlined in this document, HMRC will:

• Take a light-touch approach to penalties. Customers will not have to pay penalties for inaccuracies relating to the off-payroll working rules in the first 12 months unless there is evidence of deliberate non-compliance.

• Continue to operate a dedicated project team to deliver education on the off-payroll working rules and support customers applying them through a number of formats. This includes one-to-one education discussions, webinars designed to provide all affected businesses with further support, working with specific sectors, and checking that the education and support is effective. 

HMRC change to the off-payroll working rules

Announced 7th February 2020 

In response to concerns raised by businesses over what payments the new IR35 rules apply to and from when, HMRC has reviewed and amended the rules to give businesses more time to prepare. In a press release, HMRC said:

“The rules, also known as IR35, will now apply only to payments made for services provided on or after 6 April 2020. Previously, the rules would have applied to any payments made on or after 6 April 2020, regardless of when the services were carried out.”

This means that organisations will only need to determine whether the rules apply for contracts they plan to continue beyond 6 April 2021. The IR35 legislation has already been implemented in the Public Sector, and it is going to be extended to the Private Sector from 6th April 2021.

View the full announcement.

This material is intended for general information purposes only and does not constitute legal advice. Specialist legal advice should be taken in relation to specific circumstances.