HM Revenue and Customs has announced a slight delay to the off-payroll working rule changes that come into effect on 6 April 2020.
HMRC are starting to realise just how difficult these rules will be for businesses to implement” – Andy Chamberlain, IPSE
Off-payroll working rules for larger private sector companies will now only apply to payments made for services provided from 6 April 2020.
Previously, the rules applied to any payments made on or after 6 April, regardless of when the services were carried out. It means businesses will only need to determine whether the rules apply for contracts they plan to continue beyond 6 April, supporting businesses as they prepare.
HMRC announced the amendment today ahead of the publication of the government’s review, due to conclude this month, which has been dismissed as “meaningless” by contractor groups.
The government is extending the 2017 reform of the operation of the rules in the public sector to medium and large organisations in April 2020. This will shift responsibility for operating the rules to the organisation that engages the worker. This is how employment status for tax is decided for the vast majority of people, who do not work through their own company.
However, the Association of Independent Professionals and the Self-Employed (IPSE) said the amendment will be “little comfort” to self-employed people already facing losing their contracts because of the legislation.
It stated that the move was a response to the fact that during its review, it found that businesses were concerned about “what payments the rules apply to and from when”.
Andy Chamberlain, IPSE’s deputy director of policy, said: “As we approach the April deadline, HMRC are starting to realise just how difficult these rules will be for businesses to implement. Delaying the start date to when the work is actually performed, rather than paid for, is a sensible move, but it doesn’t address the fatal flaws in the legislation itself.
“This minor amendment will be little comfort, therefore, to the many contractors already being laid off by companies who are panicking about the approaching changes. We are still campaigning hard for the government to halt the IR35 changes while a full and independent review is carried out into the very serious risks for hundreds of thousands of contractors, the businesses they work with and the economy as a whole.”
The government’s intention is to ensure that an individual who works like an employee, but through their own limited company, pays broadly the same income tax and national insurance contributions as those who are employed directly.
Matthew Sharp, tax specialist at law firm Fieldfisher, described HMRC’s announcement today as a welcome clarification. “While this change gives private sector businesses and contractors who stand to be affected by the new legislation a little more time to prepare, the government has so far failed to address core concerns regarding IR35,” he said.
“Many of the clients we work with have expressed frustration with HMRC’s process for determining employment status for tax purposes, and this announcement reveals no plans to improve this.
“It seems the government has not learned from the mistakes made in 2017, when IR35 was rolled out to the public sector, resulting in legal wrangles that are still going through the courts today.
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“Many businesses fear losing vast swathes of their workforce if the processes for assessing tax status is not adjusted to reflect the realities of modern working practices.”
Contractors are being urged by IPSE to march on Westminster against the IR35 changes. A protest, organised by the Stop The Off-Payroll Tax campaign, will be held on 12 February.
7 comments
This rule change completely changes the viability for me to work self employed. I have completed 15 contracts in 12 years. Much of my work is not within daily commuting because I am a subject matter expert living in the south west. Unlike a project manager or business analyst my work will not be local. That means in 12 years Riyadh, Luxembourg, South France, Dartmore, Manchester, London, Glasgow, Birmingham etc. On-payroll PAYE/NI equates to £80-100 day less income. My accomodation and travel £120-150/day. I can on payroll not claim for the latter. My contracts have been producing defined deliverables, other than 2 interim cover roles. Yet the majority of employers will now be playing safe and not offering off payroll. I worked up to April 2017 in the public sector and contractors just left. This time of course there is no where to go but overseas. Some will, If there were a person in the firm doing a similar role (and there is on the whole not in 10 of 15 contracts ) then HMRC would say I should pay the same tax, well that person doesn’t have 4- 6 weeks a year down time where they dont get paid between work, I get 1 weeks notice period they get 4 – 12 weeks, they get redundancy pay , I do not ,m they get holiday when they want to take it and it is paid , mine is not, they get sick pay, i do not and they get training days, they get their pension paid. The changes made by HMRC not only destroy any marginal risk reward they make it totally unviable. So I will take my subject matter skills and get a permanent job. This comment by HMRC is disingenuous. Its about risk and reward and flexibility.
well said Paul, absolutely spot on, you also forget perks of medical insurance, company cars , other benefits etc . This reform is wrong on so many levels
Exactly my position and my argument, how will they expect us to do the things we do for half the money before expenses…also there is an ethical issue here which I have not heard anybody mention yet, is it acceptable that an un-elected entity is able to dictate how a person may sell his/her services in a free enterprise system, with emphasis on free?
I am one of those contractors who will be losing my job at the outset of IR35.
The legislation is seeing many companies just blanket categorise contract work inside IR35, even when they are not.
I think the government has got this wrong, as it’s not clear and companies are running scared through lack of understanding and risk of tax issues arising.
Hello transport industry. Just a HGV Driver limited. As from 1st of April. The blue chip company i have worked for 22 years will no longer be able to pay me as a freelancer. I will consider dropping my vocation and finding a normal 9 to 5 job. At this time with Corvid 19. My services are important to keeping shelves stocked. Many drivers consider this a betrayal by the government. This takes my freedom to work where and when i am needed. Taking away expenses claim against tax will hurt many industries. Not just transport industry
Great news last night, by granting a year extension.
Maybe in this 12 months they can look deeper and finally realise that our one man operation’s are doing nothing wrong, and that it’s the bigger Ltd Company’s they should be clamping down on!
IR35 comes in April, do they realise the consequences in the transport industry, we are 59000 class 1 drivers short in uk come April I can see this rising to over 100000, all this government considers is making more money they really don’t give a toss about people’s life’s
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