Extension of the off-payroll (IR35) rules into the Private Sector

Important Changes to Legislation Effective 6th April 2020

 

What is Happening and When?

 What: The Government is extending the off-payroll rules, which have applied in the public sector since April 2017, into the private sector. The new rules will apply to work done by contractors working through intermediaries such as personal service companies ( PSC) . Importantly, the tests for IR35 status are not changing but the responsibilities for making the IR35 status decision and related deductions are.

When: The new rules will apply to all payments made to personal service companies for services provided on or after 6 April 2020.

What’s the difference? From 6 April 2020, the client, and not the contractor, will be responsible for assessing IR35 status. For inside IR35 assignments, the fee-payer will have to make tax and national insurance deductions before paying the personal service company.

The off-payroll rules which currently apply in the public sector will be extended into the private sector from 6 April 2020, albeit with some changes. This means that a client will need to know how a contractor is engaged e.g. whether PAYE’d by an agency, or whether paid via an intermediary such as a personal services company or an umbrella company (the rules will apply even where clients engage contractors directly rather than through an agency). The key issue is that where the off-payroll rules apply, the client will be responsible for assessing the contractor’s status for tax purposes. So which clients will the off-payroll rules apply to and what will the client need to do? ... please click here to view our factsheet with more details.

How Can we help?

Bamford Contract Services have over 30 years of expertise recruiting and processing weekly pay for contractors and construction workers and we would be more than happy to discuss any concerns you may have regarding any PSC contractors that you are currently engaging. Rest assured that we have only ever operated a fully IR35 compliant payroll for our temporary workforce whether though our own dedicated payroll systems or through our fully compliant contracting CIS and Umbrella service partners. Please call our team on 01706 863704 - we are here to help

 

Further Resources

You can view the draft legislation here and the government policy paper here. See also HMRC’s initial guidance and more detailed Employment Status Manual (see chapters 9000, 10000 and 11000). 

See also HMRC’s Check Employment Status for Tax tool and CEST guidance. (Note – clients do not have to use CEST).

The final legislation is expected on budget day (11 March 2020) or shortly after that.  Meanwhile the Recruitment and Employment Confederation (REC)  have produced a Factsheet for Clients and Contractors regarding  the changes. Please see the links below.

  

pdf REC IR35 guide for Clients (148 KB)

pdf REC IR35 guide for Contractors (157 KB)

pdf Example Status Determination Statement (246 KB)