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Government confirms that IR35 will go ahead

3rd March 2020

The new Off-payroll working rules, known as IR35, will come into effect on 6 April 2020, the Government has confirmed. It has also announced a package of measures designed to support the roll out of off-payroll working rules.

IR35 force companies to treat contractors working through a personal service company as employees and has forced many employers to assess whether they have to pay taxes on behalf of a contractor.

The Government has published its review into the rules and announced a series of measures to address concerns and ensure the smooth implementation of IR35. Under the measures:

  • businesses will not have to pay penalties for inaccuracies in the first year, except in cases of deliberate non-compliance
  • detailed guidance on the reforms has been published by HMRC
  • HMRC will ramp up its communications efforts, including webinars and guides, to support contractors’ understanding of the rules. This will complement the significant work already in train to support businesses to prepare
  • the government reiterates that new information from the changes will not be used to open investigations into Personal Service Companies (PSC) for past tax years, unless fraud or criminal behaviour is suspected

Financial Secretary to the Treasury Jesse Norman said: “It is only right that the off-payroll rules are applied consistently across all sectors. Two people sitting side by side doing the same work for the same employer should be taxed in the same way.

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 cost to the Exchequer of non-compliance with off-payroll working rules is estimated to reach £1.3 billion a year by 2023-24, depriving public services of vital funds.

The reforms, announced in the 2018 Budget, are designed to tackle non-compliance with the off-payroll working rules by making medium and large organisations in the private and third sectors responsible for determining the tax status of contractors and ensuring that the right employment taxes are paid. The reforms have previously been implemented in the public sector.

Source: Spector magazine