The Government is launching a review of changes to off-payroll working rules today. I repeat below what they have sent out. I will continue to press for urgent change as I appreciate the problems this is currently causing:
- Government launches review into implementation of changes to the off-payroll working rules
- Review will gather evidence from affected individuals and businesses to ensure smooth implementation of the reforms
The Government is launching a review of changes to off-payroll working rules today to address any concerns from businesses and affected individuals about how they will be implemented.
The review will determine if any further steps can be taken to ensure the smooth and successful implementation of the reforms, which are due to come into force in April 2020. As part of this, the review will also assess whether any additional support is needed to ensure that the self-employed, who are not in scope of the rules, are not impacted.
Off-payroll working rules, known as IR35, were introduced in 2000 to ensure that someone working like an employee, but through a company, pays similar taxes to other employees.
The reforms, announced in the 2018 Budget, are designed to tackle non-compliance with off-payroll working rules by making medium and large organisations in the private and third sectors responsible for determining the tax status of contractors.
The review will focus on the implementation of these reforms, which are due to come into force on 6 April 2020.
The government will launch a separate review to explore how it can better support the self-employed. That includes improving access to finance and credit, making the tax system easier to navigate, and examining how better broadband can boost homeworking.
Today’s announcement fulfils a commitment made by Chancellor Sajid Javid on November 30th last year.
Financial Secretary to the Treasury Jesse Norman said:
We recognise that concerns have been raised about the forthcoming reforms to the off-payroll working rules.
The purpose of this consultation is to make sure that the implementation of these changes in April is as smooth as possible.
The review, which will conclude by mid-February, will engage with affected individuals and businesses on their experiences of the implementation of these reforms.
As part of the review, the Government will hold a series of roundtables with stakeholders representative of those affected by the reform, including contractor groups and medium and large-sized businesses, to understand how the government can ensure smooth implementation of the reforms. The Government will also carry out further internal analysis, including evaluation of the enhanced Check employment status for tax (CEST) tool and public sector bodies’ experience of implementing the reform to the off-payroll working rules in 2017.
The off-payroll working rules do not affect the self-employed, as only those working like employees are in scope. As part of the review, the Government will explore whether there are any further steps it could take to support businesses in correctly determining employment status.
In parallel to the review, HMRC will continue its comprehensive programme of education and support activities, proactively helping customers to prepare for the reform to off-payroll working rules in April 2020. This will include one-to-one engagement, webinars and workshops alongside targeted communications and support for customers, and their representatives to help them prepare for implementation on 6 April 2020.
January 9, 2020
Disappointing to see the scope of the review to just facilitating the implementation, and not whether or not the IR35 legislation is going to undermine the contractor market.
It does seem distinctly unfair for legislation to dictate that a contractor who puts all their income into a limited company, which pays corporation tax, VAT, dividend tax, plus medical, travel, professional indemnity, public liability insurance out of the income, and then the contractor pays NI and income tax on money they take out of the company, is then subject to pay more NI tax as if they were an employee, but receive no employee benefits.
If this were a proper review, shouldn’t you be lobbying for anyone deemed inside IR35 and taxed as an employee to be given all employee rights and benefits like holiday and sick pay?
Or make a change so that anyone who works within ir35 during the year is able to file dormant company accounts for the year their company was not operating?
Contractors would have to take a hit on potentially wasted PI and PL insurance, but would balance working inside ir35.
Basically, if I wanted to be an employee, engage in office politics and get all the employee benefits, I would apply for permanent jobs.
But I don’t. I want to sell my skills and ability to a company to deliver a service, or an improvement, and leave once the job is done. But as such engagements potentially take years, and require working alongside company employees, stakeholders and decision makers, as part of a wider team, I fear lots of contractors are going to get caught by this legislation, and have no say in how their client determines their status.
It seems to benefit the larger, established companies, and the overseas outsourcers. I’m not sure what the overseas outsourcers pay HMRC in tax, but it seems they benefit more from this legislation that UK citizens trying to pay their way and not be a burden on the estate.
It’s certainly not something I would expect a conservative government to support.
January 10, 2020
The off-payroll working rules do not affect the self-employed, as only those working like employees are in scope.
If this is true then there is really nothing of concern and the legislation is fair to us PAYE serfs to make sure everyone is treated equally. But as ever with government implementation there will be fall out.
January 11, 2020
“… introduced in 2000 to ensure that someone working like an employee”
Having worked under IR35 for a number of years in the past I should point out a couple of important differences:
-IR35 contractors may be dismissed at a moments notice when their services are no long required.
-They did not enjoy any pension contributions
Many of us over a certain age were forced into IR35 employment because ageism prevented us obtaining permanent employment.
January 11, 2020
“The off-payroll working rules do not affect the self-employed, as only those working like employees are in scope.”
This is the Treasury line but I can tell you from personal experience that the genuine self employed are also being impacted by what is a sledgehammer used to crack a nut.
IR35 is complex and is in essence the employment test. If you are inside IR35, you meet the employment test (and should have an employment contract and not a contract for services in my view). Clients are being risk averse and also don’t want the additional red tape burden (each individual contractor engagement should be assessed separately as individual circumstances may differ).
As such blanket inside determinations are common or clients are simply refusing to engage Ltd. company contractors and insisting on PAYE or leave options.
The Off Payroll Rules enable clients to class contractors as deemed employees, to tax them as employees (including deduction of employers NI contributions by reducing rates) but don’t have to provide any employment rights. Clients will retain the right to terminate contracts when projects are completed or paused or cancelled. As such all the flexibility without any obligations. This is a significant reduction of Worker’s rights but no one seems to have noticed or cares for that matter.
There is no independent right to appeal the client determination. Any appeal can only be made to the client who is unlikely to change their original determination due the reasons given above.
Contractors will also lose the ability to offset the cost of travel and accommodation when working on assignments long distances away from home.
This measure will harm flexible working and ultimately the economy as projects are delayed or cancelled due to lack of flexible resource or increased costs.
Well done HMRC and the Treasury.
MPs need to develop a more questioning attitude and ask for evidence to be provided with respect to the claims being made and not simply accept the spin.
I am now looking to close my company and return to permanent employment closer to home. This will lead to reduction in the tax take as I will earn considerably less and loss of a flexible contractor who was previously travelling to remote locations to support clients in delivering projects.
January 11, 2020
I am staggered abd disgusted at this decision and I am appalled that we have been lied to.
All that is happening is companies are taking a risk adverse option by requesting contractors go via an umbrella company, regardless whether the work is inside or outside ir35. This, determining whether or not a contract is inside or outside ir35 simply wont happen as companies apply blanket rules to all contractors.
I now have to pay personal, ni, the umbrella company fee. Plus, in case I do get an outside ir35 contract, then I need to keep my company running, so I have to incur accountancy fees, insurance, employer ni.
Plus I get zero benefits. No holiday pay, sickness pay, redundancy, job security, perks like life assurance, healthcare, pension, etc.
There is no allowance for the risk we take, for our experience. I have provided my own training to, which is costly.
It’s a myth we are well paid and psy no tax, we pay corporation tax instead if personal tax. The HMRC have misled everyone.
Can someone in the government and HMRC please explain how this is fair.
What a shambles.
20% of contractors on my programme have already left, disgusted at the way this has been handled. At least 50% will leave by end deb if nothing changes, this is 100s of contractors.
This country is heading for a meltdown. I dont think people realise how important contractors are.
January 12, 2020
Given that the employment miracle of late is driven by the self employed – this does seem to be shooting itself in the foot by the government.
January 12, 2020
The solution to IR35 is simple. It should be repealed.
This was a punitive piece of legislation brought in my Gordon Brown after he failed over a couple of years to screw self employed contractors on the basis that Labour doesn’t like anyone who displays acumen and ability.
I abhor Friday to Monday arrangements where the employed leaves on Friday and come back Monday as a contractor doing the same job at half the pay. This clearly not an acceptable arrangement and it is perfectly correct to challenge it.
Brown tried to re-enact legislation that was in force dating back to the time of Charles II. The Professional Contractors Group was formed to fight it and won several court battles. It seems that Brown only backed down when it was made clear that if we lost in high court, then we would fight it in the European Court. The last thing Labour wanted to admit was something we all knew – that EU courts can overrule British court.
Brown’s most stupid error was faffing about for so long. IR35 was and is inherently unfair to single employee private companies. However unfair it was perceived to be, if Brown had introduced it and said this is what will happen from next 6th April, we would have swallowed the poison and prepared to restructure accordingly. Acting as he did cost the treasury a couple of years in extra taxes and loads in legal costs.
Not the sharpest chisel in the box, our Gordon. And here we are all these years later still stuck with it and still tinkering around the edges instead of biting the bullet.
Thankfully, I am retired and have been for many years now so it doesn’t effect me personally, but it did and still does inspire in me genuine anger.
January 12, 2020
Sorry – meant to say twice the pay in para 3. Obviously.