New IR35 briefing note provides some comfort for contractors

Commenting on the publication of a new HMRC briefing on the reform of off-payroll working rules, published today, Susan Ball, Employer Solutions Tax Partner at RSM said: 

'Today's announcement is encouraging in that HMRC is being proactive in seeking to engage with affected businesses to help them understand and implement the new rules correctly. However, we remain concerned that HMRC will not necessarily know about all the businesses in scope, and there is a risk that some will fall through the gaps. 

'We also look forward to the launch of the new CEST tool before the end of this year, which should help reduce the confusion and errors that we have seen in employment status determinations to date. It is pleasing that HMRC have confirmed that if you use the current version they will stand by the decision if it is completed correctly.  

'Today's statement also provides some, albeit limited, comfort to contractors who have been worried that HMRC could look to open new enquiries into past tax disclosures as a result of these changes. 

'HMRC has now indicated that they will only use information resulting from these changes to open new enquiries into previous years if there is reason to suspect fraud or criminal behaviour. However, the statement is slightly ambiguous and is not entirely clear on what this would mean in practice when people perhaps previously haven't applied the rules correctly.'

The IR35 rules are designed to ensure that individuals working like employees, but through their own limited company (or certain other intermediaries such as LLPs), pay broadly the same tax and National Insurance contributions as those who are employed directly. 

Previously, the responsibility for assessing employment status - and therefore the level of tax to be paid -  rested with the contractor in the private sector. The new rules, which are due to come into force in April 2020, will mean that large and medium-sized organisations will become responsible for assessing the correct employment status of the contractors they engage to work for them, as the public sector does now. 

IR35 - Public sector

Changes to off-payroll working - IR35

The Government confirmed that the off-payroll working rules (IR35) will be reformed from 6 April 2020. It’s important not to underestimate the impact of these changes and to start preparing for them now. 

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