IR35 update

We advised, in a previous article, that the IR35 regime is scheduled to be extended to all medium and large companies in April 2020.

Over the past few months, there has been a clamour from various organisations for the Government to rethink the extension of IR35 on grounds of what some claim would be damage to the economy and thousands of individuals currently working as contractors to firms under the guise of a personal service company. The noise around IR35, and pressure from a number of MPs, led to the Government agreeing to a six week ‘review’ of the proposed changes.

So, at time of writing, it is unclear whether the changes will go ahead as planned in April, be deferred, or be significantly amended.

One change has already been announced. The off payroll rules will now apply only to payments made for services provided on or after 6 April 2020. Previously, the rules would have applied to any payments made on or after 6 April 2020, regardless of when the services were carried out. It means organisations will only need to determine whether the rules apply for contracts they plan to continue beyond 6 April 2020. The Government has stated that this change is to give firms more time to prepare yet the proposed changes have been known for over a year so this statement would appear to be a bit disingenuous. The real reason is probably more an attempt to assuage the political and business pressure.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

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Our View

The proposed changes are clearly already having an effect. A number of well-known companies have announced that they will cease using contractors, including GSK, Barclays, Lloyds and HSBC as well as many non banking firms such as Aegon. It has also been reported that some national advice firms intend to cease using contractors.

Clearly, we cannot predict the outcome of the review currently taking place. A report is due by the end of February 2020. However, few commentators appear to believe that there will be any delay beyond April or any further significant changes.

The off payroll rules are not a FCA regulatory matter so we would refer firms to their own tax advisers for detailed advice on whether and how they are affected by IR35.

Action Required By You

For information. You can read more about the latest news on IR35 here and here.

The HMRC fact sheet for contractors can be found here.

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About the Author

Technical Manager - Often referred to as the Oracle or the Sage, Alistair has a wealth of financial services experience. He is our go-to Technical Manager and enjoys nothing more than a complicated conundrum. Feel free to test his renowned knowledge by getting in touch.

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