Three months before the new rules are due to come into effect, the government has launched a review into changes to the off-payroll working rules for the private sector to address concerns about how they will be implemented.
The off-payroll working rules, known as IR35, were introduced in 2000 to ensure that someone working like an employee, but through a company, pays similar taxes to other employees.
The reforms are designed to tackle non-compliance with off-payroll working rules by shifting the responsibility for determining the tax status of contractors to medium and large organisations in the private sector who are using their services. They are due to come into force on 6 April 2020. Similar rules have been in force for the public sector since 2017.
The review will run until mid-February and will consider whether any further steps are needed to ensure the new rules are implemented smoothly.
Financial Secretary to the Treasury Jesse Norman said: “We recognise that concerns have been raised about the forthcoming reforms to the off-payroll working rules."
“The purpose of this consultation is to make sure that the implementation of these changes in April is as smooth as possible.”
The review will engage with affected individuals and businesses on their experiences of the implementation of these reforms.
As part of the planned review, the Government will hold a series of roundtable meetings with stakeholder representatives of those affected by the reforms, including contractor groups and medium and large-sized businesses, to understand how the government can ensure smooth implementation of the reforms.
The Government will also be evaluating the enhanced Check employment status for tax (CEST) tool and public sector bodies’ experience of implementing the reforms in 2017, amongst other analysis.
As part of the review, the Government will explore whether there are any further steps it could take to support businesses in correctly determining employment status.
Alongside this, HMRC plans to continue its programme of education and support activities to help those affected to prepare for the reforms.
Finally, the government has said that it will also launch a separate review to explore how it can better support self-employed workers. This support may include improving access to finance and credit, making the tax system easier to navigate and examining how better broadband can boost homeworking.
What does this mean for businesses preparing for the new off-payroll working rules?
What is clear from the Government's announcement is that the review is focussed on the implementation of the planned reforms. There is no suggestion at the moment of any delay or change of course by the Government. It seems likely that the rules will come into force as planned on 6 April 2020 and businesses should continue to prepare for the changes.
In another development, on 13 January 2020 HMRC updated its guidance on the new off-payroll working rules with the publication of a factsheet for contractors: Changes to off-payroll working rules (IR35). The factsheet refers to the Government review and confirms that the rules are due to be introduced on 6 April 2020.
We are helping clients prepare for the new rules by providing advice, guidance and documentation. For more information or help with getting your business ready, please get in touch with your usual Clyde & Co contact.