IR35 news update – from soft landings to Holmes under the hammer

26 February, 2020

The Chancellor, Rishi Sunak, announced on 22nd February that the changes to off-payroll regulations (known as IR35) would have a “soft landing” and that tax officials will not be “heavy-handed” with enforcement for the first year of implementation to give people time to adjust. He also stated that the current review into the implementation of the new policy is likely to lead to “tweaks and improvements to make sure the transition is as seamless as possible”. It remains to be seen what this announcement will mean in practice, and whether it will provide the reassurances which are needed by contractors and the organisations which engage them when there are widespread concerns that the IR35 changes will be disruptive to businesses and damaging to the wider economy.

Earlier this month HMRC confirmed that the upcoming IR35 reforms will apply only to any supplies of labour provided on or after 6 April 2020. This means that businesses will only need to determine whether the new rules apply to any contracts they are planning to continue beyond 6 April 2020.

The changes, which are due to come in on 6 April 2020, mean that medium and large businesses in the private sector who engage consultants via intermediaries will now be responsible for identifying employment status rather than the intermediaries. The rules, which have been in place since 2000, are designed to ensure that any individual who works like an employee, but through their own limited company, pays broadly the same Income Tax and National Insurance contributions as those who are employed directly. Read more about the changes here.

The Government’s review into the new rules around off-payroll working is due to conclude in February, and the finalised legislation is awaited imminently, so watch this space for updates.

The House of Lords’ Finance Bill Sub-Committee has also been hearing evidence this week from contractors’ representative bodies about the IR35 reforms, with questions including the readiness of business for these reforms, their effect on the labour market and the wider economy, and lessons to be learned from when similar reforms were introduced to the public sector in 2017.

Finally hitting the headlines this week was the judgment of the First Tier Tribunal in the case involving the broadcaster Eamonn Holmes and the personal service companies through which he provided his services to ITV to present This Morning. The Tribunal scrutinised the contracts and working arrangements and determined that the IR35 rules applied to these contracts as “disguised employment”.

For advice on how IR35 could impact your business, and for practical and commercial guidance and support in implementing the new rules, please contact Patrick Glencross.