IR35 and off-payroll working

Off-payroll working in the private sector - changes are coming

The government confirms that it is extending Off-payroll working in the public sector to private sector engagements from 6 April 2020.

The change will only apply to engagements by medium or large end clients. A consultation on these new rules will be published in Summer 2019.

PSCs working for small engagers will be unaffected and will continue to self assess under the existing IR35 rules and the government currently claims there are no plans to revisit the difference in rates of NICs paid in respect of employees and the self employed.

To recap what's happened so far. From 6 April 2017 any worker providing their personal services either personally or via a Personal Service Company to a public sector body are taxed as if they are employees. The worker's company does not apply IR35 to the engagement.

The public authority or agency is now responsible for assessing the worker's employment status. If it decides the worker would be an employee if engaged directly they have to deduct PAYE and NICs from the fees invoiced by the worker's company. The public body may also reimburse any expenses charged by the worker or its company, if agreed under the contract.

It is anticipated that an individual does not obtain any employment rights under this arrangement and so there may be future legal challenges by affected workers.

The new announcement states that from 6 April 2020 the government is extending Off-payroll working in the public sector to private sector, although the change will only apply to engagements by medium or large end clients.

The government is additionally considering what enhancements should be made to the information customers provide to HMRC regarding payments to personal service companies.

HMRC define a personal service company as a company that generates the majority of its income from supplying services (not goods) from the activities of one individual so it is quite a wide ranging definition which doesn't only apply to I T workers.