March 2020 Update - Off-payoll working legislation delayed until April 2021 due to COVID-19
The last minute review of how the new rules would operate, brought about by an intense campaign by and on behalf of the contracting industry, led to HMRC undertaking a detailed review of the draft legislation due to come into effect on 6 April 2020.
Here’s a quick look at the key outcomes of this review which began in January.
- “Non-compliance with the existing rules is unsustainable and the reform will therefore go ahead on 6 April 2020” (Chapter 4, 4.1 of the Report)
- Taxpayers will not have to pay penalties for errors relating to off payroll in the first year, except in cases of deliberate non-compliance;
- HMRC confirm that information resulting from changes to the rules will not be used to open new investigations into PSCs for years prior to 6 April 2020;
- The new rules will only apply to services carried out from 6 April 2020 (already announced);
- There will be an obligation on end clients to respond to a request for information about their size from the agency or contractor;
- A change in how the rules will be applied to exclude wholly overseas organisations with no UK presence. The individual’s limited company will continue to determine the status of the individual.
The new rules are coming in as planned
Our initial observations are that, as expected, the new rules will come into effect. There is to be no delay or material mitigation.
Although there is to be a ‘soft landing’ in year one as regards to interest and penalties, the tax liability will still remain if the individual is found by HMRC to be within IR35.
The extensive lobbying and feedback from stakeholders made it clear to HMRC that the industry was not ready for such a large scale shift in the way in which the new rules were to be introduced. The criticism of the enhanced Check Employment Status for Tax (CEST) remained even though HMRC were able to report that it had been used more than 230,000 times since November.
There will be more education and support
The Report outlines an HMRC campaign of education and support including one-to-one support for the largest businesses, direct letters to over 40,000 medium-sized businesses and a range of webinars and workshops for recruitment agencies, tax agents and contractors. It promised to maintain and extend this support.
Industry stakeholders received an assurance from HMRC, published in the Report, that they would raise awareness of the risks of using avoidance schemes and arrangements with individuals, end-clients, agencies and intermediaries.
More help regarding reasonable care
The HMRC guidance ‘Employment Status Manual’ updated earlier this month is also referred to in the Report providing explanations of what behaviours HMRC regard as constituting ‘reasonable care’. This concept had been unclear in the context of a status determination made using either the CEST tool or another tool or adviser. Further guidance and examples have also now been provided relating to the transfer of liability provisions and recovery from other persons.
Many end-clients and agencies are already making decisions regarding their IR35 position. Some have enlisted the help of PayStream to help carry out IR35 assignment reviews, others have requested help transitioning their contractors seamlessly to our umbrella company service.
Whatever your position and whatever your circumstance we are here to help.
So, if you’re an agency or end client looking for more help and advice regarding the off-payroll working legislation please contact your CRM or our Agency Support Team at email@example.com.
If you’re a limited company contractor that is unsure as to how these changes affect you, then contact our New Business Team on 0161 923 0201.