Extension of IR35 to Private Sector
Chancellor Philip Hammond announced in the Budget on 29 October 2018 that the IR35 tax rules would be extended to the private sector in April 2020.
The rules are aimed at reducing tax avoidance for off-payroll contractors working through personal service companies (PSC).
From 6 April 2020, medium and large sized private sector businesses will become responsible for assessing the employment status of the off-payroll workers they engage.
As the government reports that the cost, in terms of lost tax revenue, of non-compliance with the off-payroll working rules in the private sector is growing and will reach £1.3 billion a year by 2023/24, it is clear that change is coming, and businesses need to act now.
The government recommends that businesses affected by the proposed reform:
- Look at their current workforce (including those engaged through agencies and other intermediaries) to identify those individuals who are supplying their services through PSCs;
- Determine if the new off-payroll rules will apply for any contracts that will extend beyond April 2020. Businesses are encouraged to use the Check Employment Status for Tax service to do this;
- Start talking to contractors about whether the off-payroll rules will apply to them; and
- Put processes in place to determine if the off-payroll rules apply to future engagements.