We reminded you in our January 2020 Newsletter Government reforms: New year, New law! that changes to the IR35 rules are due on 6 April 2020 for medium and large businesses in the private sector. In general terms, under the proposed new regime, the onus will shift from the personal service company (PSC) to the end user client to make a status determination. Responsibility for accounting for tax and national insurance would be on the party who pays for the individual’s services, i.e. the client or end user.
For more information on the IR35 reforms in the private and charity sectors see our Blogs here.
HMRC has published, in draft, a series of additions to its Employment Status Manual (available here) confirming how the new IR35 rules will operate and also providing important clarifications.
Of particular interest is that the new IR35 rules will apply to payments made on or after 6 April 2020 only where the services were also provided on or after 6 April 2020. This means that payments after 5 April 2020 for services provided before 6 April 2020, will not be caught by the changes. This is helpful clarification for end user clients who currently engage individuals via PSCs – it means that there is an additional period in which businesses have time to prepare for the implementation of the new rules.
The Government has also published, for consultation, draft regulations to enable the recovery of national insurance contributions (NICs) where the new IR35 rules apply and setting out how HMRC will recover unpaid employment taxes from other parties in the supply chain.