Changes to the operation of the off-payroll working rules will only apply to payments made for services provided on or after 6 April 2020, HMRC has announced today ahead of the publication of the government’s review.
The formal publication of a review into the implementation of changes to the off-payroll working rules is due to conclude in February.
A common issue raised over the course of the review has been businesses’ concerns over what payments the rules apply to and from when. The government has listened and taken action early to give businesses certainty and more time to prepare to ensure the smooth and successful implementation of the reforms that come into force in April.
The rules, also known as IR35, 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, supporting businesses as they prepare.
This is set out in updated guidance in the Employment Status Manual.
The off-payroll working rules have been in place since 2000. 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 those who are employed directly.
The government is extending the 2017 reform of the operation of the rules in the public sector to all medium and large organisations in April 2020. This will shift responsibility for operating the rules to the organisation that engages the worker. This is how employment status for tax is decided for the vast majority of people, who do not work through their own company.
HMRC is making businesses aware of this announcement through updated guidance and in its ongoing education and support products
HMRC will also write to those that have already attended webinars or one-to-one engagements to explain the change
- Public sector organisations already applying the off-payroll working rules will not be affected by this change
- Contractors can find information about changes to the off-payroll working rules in HMRC’s Contractor Factsheet