Legislation confirmed for new off-payroll rules starting in April 2020

Commenting on the IR35 off-payroll draft legislation published today, Susan Ball, employer solutions partner at RSM said:

'Those who were hoping for significant changes to the proposed off-payroll (IR35) rules following the consultation will be disappointed to see that there has only been tinkering around the edges. 

'The draft Finance Bill published today confirms that from April next year, the onus will be on medium and large private sector businesses who engage freelancers via an intermediary to determine the correct employment status of their contracted workers. This will determine how much a contracted freelancer should be paying in terms of income tax and NICs, and how much the business should be paying in employer NICs and the apprenticeship levy where applicable.

'The real challenge for medium and large businesses is going to be applying this test without having a reliable tool with which to make a decision. Only this week, a judge in the tax tribunal highlighted the difficulties in determining employee status under IR35 as this is not clear cut and very much depends on individual circumstances. HMRC have been losing many cases over recent months which also underlines the scale of the challenge. 

'Today's draft Finance Bill also contains important changes to the rules for public sector bodies, notably, the transfer of status determinations down the chain. This will mean public sector bodies will have to outline the reasons for their status decision to intermediaries in the chain such as recruiters, as well as well as to the contracted worker. 

'All of these changes come with the requirement to undertake due diligence of the contractor supply chain because of transfer of debt (tax and NIC) provisions in the legislation. 

'Given these rule changes are due to come into force from April 2020, there is very little time for organisations to get to grips with these complex requirements – particularly as the legislation won't be finalised until November, and the new version of CEST (the HMRC employment status tool), won't be available until later this year.'

Related services