Press Release:
Off-payroll working rules from April 2020 in the Private
Sector
Summary of Responses – July 2019
In the draft clauses for the Finance Bill 2019-20, the
government has confirmed that changes to the off-payroll working rules for the
private sector will go ahead from April 2020.
The rules, based on the changes in the public sector in
April 2017, will make all engagers (other than those in the private sector
considered ‘small’) responsible for determining whether the IR35 rules apply to
the contractors they hire and ensuring the necessary PAYE tax and National
Insurance contributions (NICs) are paid.
In light of HM Revenue & Customs’ (HMRC’s) earlier
statements on the estimated levels of tax lost through non-compliance under the
existing legislation, it is not surprising that extensive lobbying for these
changes to be delayed held little sway. Businesses – both contractors and those
engaging them – now have a tight timescale to make sure that they are prepared
for the changes.
The summary of responses revealed concerns about the new
proposals to address failings with the current legislation.
The summary identifies several flaws with HMRC’s proposals,
with experts from the tax, contracting, recruitment and legal sectors warning
of the potential damages that legislating these changes for April 2020 would
cause to the flexible workforce and UK plc.
Among the recurring issues and recommendations made were:
- Halt reforms until April 2021
- Strong opposition to client-led disagreement
process
- Liability model grossly unfair on compliant
parties
- Calls for deemed employees to receive employment
rights
- Small company exemption deemed unsuitable
- HMRC’s Check Employment Status for Tax (CEST)
tool is still not fit-for-purpose
- Widespread non-compliance with the Off-Payroll
rules in the public sector
- Concerns over the timing of the proposals in
relation to Brexit.
The feedback
analysed consists of 29 consultation responses from professional bodies
including Institute of Chartered Accountants in England and Wales (ICAEW), the Confederation of British
Industry (CBI), the Recruitment and Employment Confederation (REC) and the Association of Independent
Professionals and the Self Employed (IPSE).
Next steps
HMRC guidance
on the new rules is expected during summer 2019, but even before this is
available, both contractors and engagers should begin to prepare for the
changes. Feedback from the public sector implementation was that the five-month
lead period was insufficient in many cases for sufficient procedures to be
adopted in time, especially in respect of preparing individual determinations
where multiple workers are impacted.
For
engaging businesses, this will mean that prior to 6 April 2020 they will need
to have:
- Identify
all individuals who may be impacted by the new rules.
- Determine
whether or not a contract will fall within the IR35 rules.
- Put
in place processes to ensure that these decisions are both made and
communicated consistently moving forwards.
- Engage
with all stakeholders, including individual contractors, about the tax and
procedural changes moving forwards.
- Review
their internal systems, such as payroll, finance and HR processes, to ensure
that they can make the correct tax and NICs deduction from payments where
required.
- Consider
what processes need to be put in place to deal with the specific time limits
for dispute resolution with the workers.
- Contractors
should also take this opportunity to consider whether an engager could reach a
different conclusion on their status to their own.
Peter
Livingstone, Director of Contracts & Interim at Redline Group comments:
“This summary
makes it clear that HMRC has a lot of work to do before it can seriously
consider extending the Off-Payroll rules to the private sector,” says Peter. “Many
have urged HMRC to take stock, instead of ploughing ahead with its impractical
plans. At the very least, a further postponement until April 2021 is needed to
enable HMRC to thoroughly re-evaluate the many flaws in its plans.
“What has been ascertained since Redline commenced its
campaign to help raise awareness to the impending changes is that many clients are
at best aware of IR35 but had very little idea on it’s current standing let
alone what is literally heading their way! They now have months to not only
educate themselves (Hiring Managers, HR, Legal) but assess many of the existing
contractors they may have engaged with at this time. The conversation is equally
important with the Contractors currently engaged as many businesses will assume
they are informed.
With 15% of public sector responses from CEST still being
concluded as undetermined it’s evidential that even with 2 years of
evaluation/evolution the TOOL of choice is still far from satisfactory. I
wholly agree that IR35 needs reform, it will be 20 years in existence by next
April, we can wait one more year and get it right, surely!”
For more information regarding how we can help your
business, please contact Peter Livingstone, Director of Contracts & Interim
on 01582 878852 or email PLivingstone@RedlineGroup.com.