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Off-payroll working in the private sector is confirmed for April 2020

Julian Ball

Julian Ball | Legal Director

Thursday 11th Jul, 2019

We now have the details of the Government’s proposed legislation following the publication of the draft Finance Bill 2020. The legislation is largely as discussed in the consultation document and very similar to the off-payroll rules in the public sector. It will be subject to scrutiny and possible change as it makes its way through Parliament to become the Finance Act.

There were a number of outstanding questions following the end of the public consultation and we’ve focused on these and a number of key points likely to have a material effect on the industry:

  • When does the legislation become effective? From April 2020 so you should consider contracts running past that date.
  • Is the end client required to make IR35 assessment in the same way as in the public sector? Yes and the client needs to pass its status determination to the agency it holds a contract with (normally the fee payer) and the PSC. It is required to exercise ‘reasonable care’ in doing so.
  • Can a contractor/PSC appeal an IR35 decision? Yes the legislation makes it clear that there must be a client-led status disagreement process put in place to deal with appeals and the client must give its reasons for its original decision to the appellant. This does not mean it has to change its mind but a fresh determination can be made if the client decides the original was incorrect.
  • Small company exemption – this has been included so that small clients, basically as defined in the Companies Act and in accordance with the above legislation, will not have to make an IR35 assessment and agencies dealing with those small clients will not need to make any deductions. The legislation also explains what unincorporated clients will also be affected. For PSCs in this space the risk and responsibility remains with them.
  • Is there a debt/liability transfer provision where someone lower in the supply chain doesn’t meet its obligations? Yes liability can pass up the chain even as far as the client if someone further down the chain does not pay HMRC the tax.
  • Does the legislation make any changes to public sector rules? Yes the debt transfer provisions and the right of appeal are introduced in the Public Sector too.

In conclusion, as we’ve pointed out, the Finance Bill may be amended by Parliament but we believe it is likely that the core proposals as they affect off-payroll working in the private sector will pass into legislation and that the industry should be acting now on that basis.

PayStream has an industry leading IR35 portal supported by its IR35 team that can help agencies manage both their own and their client’s obligations under the legislation. CRMs are also available to give basic IR35 training to your consultants.

For more information please contact your PayStream CRM or email agency_support@paystream.co.uk.

Related article IR35 MythBuster #2 - What happens if a client deliberately misleads an agency?

The consultation on “off-payroll working rules from April 2020” was published on 5th March 2019. The proposals are broadly similar to the public sector, however there are some key developments which will apply equally to public sector engagements from April 2020.

Read more here
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