On 17 March the Government announced that, due to the current Covid-19 arrangements being put in place, it would be postponing the proposed IR35 rules changes due to apply to large and medium sized business in the private sector from 6 April 2020.
This means that such businesses who engage with ‘off-payroll’ workers provided through an intermediary, typically the worker’s own personal service company, will not now be responsible for determining the IR35 status of these workers until 6 April 2021. This delay will also apply to the requirement to place workers deemed to be within the scope of IR35 on the ‘fee payers’ payroll.
What is the impact?
For engagers of these contractor/workers this announcement should provide welcome space to concentrate on the immediate operational needs around Covid-19 and the impact for your business and employees. However, the delay may also be helpful in presenting an opportunity for current contractual arrangements to be reviewed and where necessary amended.
Agencies supplying workers who may have been instructed to operate PAYE deductions from 6 April 2020 will no longer be required to do so, but agency clients may still of course wish to deal with the workers they provide based on the revised structure they have developed assuming the April 2020 change.
Agencies and their clients should discuss any proposed changes to their arrangements in response to the postponement.
Contractors / Workers
Many workers impacted by the proposed rule changes will have received Status Determination Statements (SDS) from the organisation they engage with directly or via an agency.
With this announcement there is now no legislative requirement for the SDS to be acted on from 6 April 2020 and on the basis the engager is happy to engage with the worker on the same basis as previously it should be possible to continue working for the private sector businesses without any PAYE deductions.
Contractors/workers will remain the decision makers in respect of determining if IR35 is in scope until April 2021 and any PAYE responsibility will continue to rest with them. However, many engagers have already reviewed the way they engage contractors/workers in preparation of the changes. They will have made commercial decisions which may continue to be implemented despite the postponement which could impact on the contractor/workers current status.
This announcement is clearly going to be helpful during this difficult time for UK business. Looking forward we recommend arrangements are addressed well in advance of April 2021 to ensure readiness next year. Where changes have been made already in anticipation of the changes from April 2020, are these still appropriate or should they be reversed or amended to optimise the commercial position going into the new tax year? Whilst welcome, this about turn does bring with it further questions for businesses in the engagement chain. We have been discussing the impact of the proposed changes and we are very well placed to support businesses going forward.
What should you do next?
For further information on the areas raised in this Insight, or to discuss the impact for your business in more detail, please contact a member of our specialist tax team. To find your local office number click here. (Please note all of our offices are temporarily closed therefore please call or email us.)