As part of a number of measures to assist businesses as a result of the coronavirus pandemic, the government announced on 17 March that changes to IR35 will instead come into effect in April 2021.
If any further changes are announced, we will update you in due course with new guidance.
The IR35 regime applies where:
In such circumstances, HMRC treats payments made from the client/hirer as earnings that are subject to PAYE deductions. Under the original version of IR35, the obligation to assess whether the arrangement was within scope of the rules. Crucially, liability for failure to comply rested with the PSC, and the individual who owned it and provided services to the client/hirer.
In 2017, these arrangements were changed in respect of clients/hirers that were 'public authorities'. This placed the obligation on the public authority client, rather than on the PSC/worker, to assess whether IR35 applied, to make PAYE deductions and to assess the risks of non-compliance.
The changes coming into force on 6 April 2021 mean that these rules will apply to medium and large businesses in the private sector. The client/hirer will be required to decide whether the relationship with the worker or their PSC is one of employment. The party that pays the PSC will have to make the appropriate deductions. Where the client contracts with the PSC directly, it will be the paying party. Where the client/hirer's contract is with an agency that itself contracts with the PSC, it will be the agency that has to make the deductions.
The review launched on 7 January 2020 is intended to address concerns from both businesses and affected individuals. The government will:
The initial review is due to be completed by mid-February.
Regardless of this latest review, businesses must be ready for the changes coming in on 6 April 2021.
We have reported on the steps businesses should take if they engage consultants, and how to plan for the new off pay roll working rules.