Changes to IR35 rules confirmed

HM Treasury has published the results of its review into changes to the off-payroll working rules, commonly referred to as ‘IR35’.

In a widely expected move, the Government had confirmed it will press ahead and implement these changes from 6th April 2020.

The reform will see the responsibility to determine whether a contractor falls within the IR35 rules pass from the contractor to the engager or agency. Where the relationship is deemed to be within IR35, the engager would be responsible for operating PAYE on payments made to the contractor.

The Government has made several minor tweaks to the rules and provided some additional clarification:

• HMRC has confirmed its previous commitment that information resulting from changes to the rules will not be used to open new investigations into Personal Service Companies for tax years prior to 6th April 2020, unless there is reason to suspect fraud or criminal behaviour.
• The Government has already announced that the rules will only apply to services carried out from 6th April 2020 onwards, so payments relating to prior periods will not be caught.
• The Government will place a legal obligation on engagers to respond to a request for information about their size. This is important because these new rules will only affect large and medium-sized engagers. For contractors working for a smaller engager, the contractor will remain responsible for determining their own IR35 status.
• The Government will amend the law to exclude wholly overseas organisations with no UK presence from having to consider the off-payroll working rules. This means the existing IR35 rules for engagements outside the public sector will be relevant where the engager is wholly overseas. The individual’s limited company will continue to determine the status of the individual.

The full HM Treasury review can be read here.

At TaxAssist Accountants, we can help you understand what these changes mean for you and help you decide what action to take. We can help you understand how these changes will affect your tax position, help you understand the off-payroll determination process, as well as help you choose what to do with your limited company.

If you have decided to close down your limited company, we can help advise the best strategy to follow.

If you would like to discuss this matter further, please do not hesitate to contact us on 0203 488 3777 or use our online enquiry form.

Date published 4 Mar 2020 | Last updated 25 Sep 2020