Government will amend the off-payroll working legislation

As stated in our previous blog article - ‘IR35 errant clause’ is much ado about nothing, the Government has now confirmed that the off-payroll legislation will not affect umbrella companies and that the legislation itself will be amended to clarify the definition of “intermediary”.

You will recall that some commentators had picked up on a flaw in the wording of the draft legislation which they argued could be interpreted to catch umbrellas. Some even went as far as warning against the use of umbrella companies unless tax was deducted before paying the umbrella company.

This always seemed counterintuitive to us since one of the benefits to agencies and contractors (and HMRC) of using umbrella companies is the assurance that the correct levels of tax are paid. This is why we have always believed that it was never the intention of government to catch umbrella companies with the legislation.

Jesse Norman, The Financial Secretary to the Treasury has now issued the following statement confirming that the legislation will be amended.

"A technical change to the off-payroll working rules will be made in the next Finance Bill. This will ensure the legislation operates as intended from 6 April 2021 for engagements where an intermediary is a company. The change will correct an unintended widening of the definition of an intermediary, which went beyond the intended scope of the policy."

We are currently in the process of sharing our knowledge and expertise with hundreds of agencies, helping them to not only understand the changes, but to also be ready for when they come in.