The Treasury has announced a review of the 'Off-payroll working' rules to determine what can be further done to ease implementation into the private sector in April 2020.

This review will run until mid-February, looking at concerns raised by both end client companies and Personal Service Company (PSA) contractors. It will hold a series of roundtables with contractor groups and businesses to discuss any issues.

The Treasury also said it planned further internal analysis of its Check Employment Status for Tax” (CEST) tool which has been criticised for being inaccurate and non-encompassing.

What's the issue?

IR35 (also know as the intermediaries legislation) was originally introduced in 2000 to make the taxation of company employees 'disguised' as self-employed pay taxes comparable to full employees. These measures are typically aimed at one-man PSAs. IR35 has always been very difficult to enforce, due to the fact that the tests for employment status have evolved over many years and that many contracting jobs are very different as are many of the firms who engage them.

In 2015 the working arrangements that IR35 was supposed to tax were renamed as 'Off Payroll' working and following consultation the 2018 Budget introduced rules called "Workers services provided to public sector through intermediaries, or the Off-payroll working rules, for short. The new rules pushed the onus to assess employment status to the end client. Confusingly, at this time IR35 also became known as Off-payroll working too.

The second stage of the changes to Off-payroll working are due to commence on 6 April 2020. This time the onus to assess employment status moves to large and medium sized private sector end clients too. Contractors working via PSAs for small company clients still remain under the old IR35 version of the Off-payrolling rules. 

There have been concerns that the new rules are too over-reaching and penalise genuine freelance contractors. The problem has been compounded by the complexities of different types of working and engagement and HMRC’s online assessment tool, CEST, has some issues.

Contractors should probably not hold out for any reversal of the April's changes as the Treasury also said that it will be

"...Proactively helping customers to prepare for the reform to off-payroll working rules in April 2020. This will include one-to-one engagement, webinars and workshops alongside targeted communications and support for customers, and their representatives to help them prepare for implementation on 6 April 2020."

The Association of Taxation Technicians (ATT) welcomed the review but said that without a delay of at least a year its implementation by businesses was near impossible. “Under the current timetable there remains less than three months for businesses to get ready for the change, and this at a time when many will be preparing for or responding to the implications of Brexit.”

Useful guides

7 vital things PSC owners must do before 6 April 2020

Off-payroll working: At a glance


CEST gets new zest


External link

HMRC Treasury IR35 review