IR35 Updates: April 2020

Posted 18/12/2019

Contractors completing work for end user clients need to be aware of updates coming in April 2020. There have been discussions concerning the change although much of this was buried underneath Brexit and general elections coverage within the media. The changes would not affect companies that, under Companies Act, are considered small. The change will mean that there will be tougher rules on if a worker is working in effect as an ‘employee’ of the end user and if so to have PAYE and NIC tax deducted from their pay.

The effect has hit the public sector previously, but now the private sector faces the same adjustment to how the service operates. While having tax deducted at source may seem ‘sensible’, there is often a reason why an individual would offer their services through a Limited Company rather than look for contracted employment which would be ignored by the rules.ContractorUK opposes the upcoming change; they have been writing to individual MPs to appeal to them, requesting that the change be averted. With the election taking place on the 12th December, the appeals were suggesting that manifestos could be changed which would in turn affect the way the public vote, particularly those supporting contractors.

The new process would involve the end user determining the status of the personnel hired from the personal service company (contractor) either by reviewing contracts or using HMRC’s online tool called CEST. The report will give a status determination statement which must then be handed to whoever pays the contract money over to the worker.

The requirement to determine a status and calculate PAYE and NIC tax for a worker may put some end users off going through the effort themselves, deciding instead to simply take on more employees as this is effectively what the contractors will be treated as by the end user. Payroll software will have the option to declare whether the individual is an employee or not and pass that information on to HMRC so end users should ensure that their payroll software is always up to date for these new rules.

The Autumn Budget, scheduled to have been released on the 6th November, was hoping to have had more information on the upcoming change. Of course, with the dissolution of Parliament for the general election the budget was put on hold and no future date before April 2020 has been called with the intention for a budget. The lack of a budget has the danger of misinforming those that need to hear the news the most and could lead to potential mistakes being made when the rule comes into effect.

IR35 features prominently in the news commonly when a television presenter or other media worker brings it up against HMRC in a court case. Some television presenters operate through the service of a limited company rather than be employed by the television company, but the way they work for the company suggests they should be employed if one goes by HMRC guidelines.

Tags: Contractors, IR35, Updates, HMRC updates, Limited Companies, Employment