The Government yesterday provided its draft legislation for the new private sector IR35 rules (which I flagged in a previous blog post here). This confirms that the Government still plans to implement the rules from April 2020.
These new rules can place reporting and tax obligations under the IR35 tax rules on BOTH the businesses which utilise the services of a freelancer with a personal service AND any other agencies or employment businesses in the supply chain.
Notable in the detailed announcements is:
1. If the business engaging an individual believes that the new rules apply to that individual, then the business will have to provide a formal determination document explaining why (to both the affected individual and any agency they've been contracted through).
2. Businesses will have to provide a disagreement process to enable individuals to challenge the assessment.
3. HMRC still hasn't provided any update to its widely-criticised 'Check Employment Status for Tax' tool.
It's a big shake-up, and could lead to some difficult decisions around key individuals within your business. Our recommended actions for businesses can be found here and if you want to know more about how Lewis Silkin can help (with audits, processes, documents etc.) then you should contact our IR35 project team at IR35@lewissilkin.com
The off-payroll working rules have been in place since 2000 to ensure fairness between individuals who work in a similar way. They are designed to make sure that an individual who works like an employee, but through their own limited company, pays broadly the same Income Tax and National Insurance contributions as other employees. The rules do not apply to the self-employed. This measure will apply to engagements with medium or large-sized organisations in the private and third sectors. It will shift responsibility for operating the off-payroll working rules from the individual’s PSC, to the organisation or business that the individual is supplying their services to. This includes responsibility for deciding whether the rules should apply and deducting the associated employment taxes and National Insurance contributions.