Last week saw the Government launch the promised review into new off-payroll working rules, IR35, that will be in effect from April 2020. 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.”
Many were hoping that the review, first announced by Sajid Javid in November 2019, would mean a delay to the IR35 changes, and some were hoping the planned changes would be scrapped altogether.
What is clear from last week’s statement is that whilst the review will take on the opinions and information from those individuals and businesses who will be affected and will aim to address any concerns raised, the implementation of the changes will go ahead as planned on 6 April 2020.
In line with the public sector changes made in April 2017, the new rules will mean that the end user (client) will be responsible for determining the employment status of all off-payroll/contract workers for their organisation. This includes all PSC contractors. HMRC will require that the end user produces evidence of their determination for each and every contractor in the form of a Status Determination Statement (SDS). The entity which pays the contractor will now be required to apply the appropriate tax deductions before payment.
The petition requesting a repeal to the changes garnered more than 30,000 signatures, but was eventually rejected in November 2019. The review that has just been announced seems, to many, to have been a ploy to win votes rather than being a meaningful and effective part of a consultation process. Julia Kermode, Chief Executive of The Freelancer & Contractor Services Association (FCSA), commented: “This seems to be another meaningless review from a Government who seems intent on bulldozing ahead with its plans anyway. They are expecting the review to be completed by mid-February which is simply not long enough to consider the deeply complex range of issues that the off-payroll legislation is throwing up.”
WHAT HAPPENS NOW?
The Government review is due to be completed by the end of February 2020 and aims to identify how to best implement the reforms, with a separate review undertaken to assess the levels of support that will be required to minimise impact on the self-employed, who are not subject to IR35.
The review will take the form of a series of roundtable events with representatives from both the contractor community and medium to large-sized businesses who utilise flexible workforces. There is also a commitment from the Government to evaluate the recently updated Check Employment Status for Tax (CEST) tool.
Whilst it can be taken as a positive that the review is actually taking place and will be concluded before the date that the legislation comes into effect, it seems that it will hold little hope of any wider changes. Our position with our clients and contractors is not to bury their heads in the sand, and if they haven’t already, to start preparing for the changes immediately.