IR35 reforms for the Private Sector

6 March 2019

The government has published a policy paper and consultation document on the proposed changes to the off-payroll working rules, or IR35, which will affect all medium and large private sector businesses in the UK from April 2020.

The Chancellor first announced the changes during the October 2018 Budget and it will see all medium and large private sector businesses become responsible for setting the employment status of any temporary or contract worker they use. It is designed to stop contractors benefiting from tax advantages and working as disguised permanent employees.

The changes will mean that these businesses will also be responsible if HMRC deems there are any inaccuracies to the employment status of workers and it is likely to prove to be a huge administrative burden for businesses. Businesses are therefore advised to start planning now. Ellacotts has significant experience in advising the firm on IR35 and can assist in your planning.

In the document, the government has committed to ensuring that an enhanced Check Employment Status for Tax (CEST) service will be available before the reform is implemented. There will also be an education and support package put in place to guide employers.

The changes will be based on the off-payroll working legislation introduced in the public sector in April 2017. The document states that:

“Companies will be required to make a determination of a worker’s employment status and communicate that determination. In addition, the feepayer (usually the organisation paying the worker’s Personal Service Company (PSC)) will need to make deductions for Income Tax and National Insurance Contributions (NICs) and pay any employer NICs. Affected organisations should, therefore, familiarise themselves with the existing legislation in Chapter 10, Part 2 of the Income Tax (Earnings and Pensions) Act (ITEPA) 2003.”

The document is open for comments until 28 May 2019.

If you are worried about your IR35 status and would like advice contact Derek Boughton on 01295 250401 or dboughton@ellacotts.co.uk.