Earlier in the week, the government opened its consultation on the planned implementation of the rules.

The rules are being extended to the private sector, with the consultation seeking to ensure proposed processes are suitable for the large and diverse private sector, as well as engagers in the public sector already applying the rules.

The off-payroll rules make end clients responsible for determining whether a worker who operates through a personal service company (PSC) or other intermediary is caught by IR35 or is genuinely self-employed. Where the worker is caught by IR35, the rules also make the fee-payer, which will often be a recruitment agency, responsible for deducting and then paying the worker’s tax, National Insurance and employer’s NI.

Commenting on the consultation, Tom Hadley director of policy and campaigns at the Recruitment & Employment Confederation, said: “The clock is ticking on getting the rules around IR35 right so that they work well for individuals and recruitment agencies, so we are glad to finally get sight of the government’s consultation. 

“We have consistently argued that agencies should not bear responsibility for the client’s decision on who falls into IR35 status. We are therefore pleased to see some movement on this, with the government saying that liability for unpaid tax and NICs will rest with the party that did not fulfil its obligations. However, the proposals may well add additional complexities, which is why we will continue to engage with HMRC and Treasury to find workable solutions and ensure a level playing field for compliant businesses.

“The government’s timeline doesn’t leave business the recommended 18 months to prepare for the new rules and REC members are telling us that their clients are largely still unaware of the changes. Recruitment businesses will play a pivotal role in raising awareness throughout their client base and in helping to improve the government’s CEST tool designed to help people check if they are considered in or out of the IR35 rules.

“The proposal that small companies should be exempt from having to determine the IR35 status of individuals will create its own challenges as agencies supplying the contractors will need to systematically check the status of the client they are providing services to. We want to avoid the unintended consequences of a significant burden being placed on those supplying recruitment services. 

“Overall, these changes will not be easy to implement by April 2020, but the REC will be working closely with our members and government to ensure the changes are workable, and that compliant businesses are not penalised. The stakes are high at this difficult time for the economy, but it is encouraging to hear government explicitly recognise the contribution that contractors make to businesses and public services across the country.”

Also commenting in the consultation, Tania Bowers, legal counsel at the Association of Professional Services Companies (APSCo), said: “It is important to note that the aim of the consultation is to understand how best to extend the implementation of this IR35 reform, which was introduced into the public sector in April 2017. This consultation will not decide whether the reform should go ahead – the government announced that it would in the 2018 Autumn Statement.

“However, following the concerns raised by APSCo members and other stakeholders, HMRC is also, concurrently, reviewing its CEST [Check Employment Status for Tax] – a tool which the majority of stakeholders feel is not fit for purpose. In fact, in 2017, after the CEST tool was introduced for determining tax status in the public sector, 43% of APSCo’s members said that ‘the HMRC tool does not generally produce reasonable status decisions in light of the factual realities of placements’.

“HMRC is undertaking some user research during March/April 2019, which APSCo members will be involved with. Any enhancements to the CEST tool will be available before April 2020.

“As co- chair of the IR35 Forum, APSCo will of course be engaging with HMRC, which is planning to hold a series of round table events to listen to the views of stakeholders – round tables which we will be very much part of.”

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