Last-minute IR35 rule change by HMRC

HM Revenue & Customs have announced changes to the operation of off-payroll working rules.

The rules will now only apply to payments made for services provided on or after 6 April 2020.

HMRC’s announcement, released this morning ahead of the publication of the government’s review into implementation of the new rules, is in response to a common issue raised over the course of the review, which is businesses’ concerns over what payments the rules apply to – and from when. 

According to the statement, government has listened and taken action early to give businesses certainty and more time to prepare to ensure the smooth and successful implementation of the reforms that come into force from 6 April.

The rules will now apply only to payments made for services provided on or after 6 April 2020. Previously, the rules would have applied to any payments made on or after 6 April 2020, regardless of when the services were carried out. This means organisations will need to determine whether the rules apply for contracts they plan to continue beyond 6 April 2020, in a bid to support businesses as they prepare for changes.

The clarification has been set out in updated guidance in the Employment Status Manual.

IPSE (the Association of Independent Professionals and the Self-Employed) says HMRC’s amendment will be of “little comfort” to self-employed people already facing losing their contracts because of the legislation.

IPSE deputy director of policy Andy Chamberlain said: “As we approach the April deadline, HMRC is starting to realise just how difficult these rules will be for businesses to implement. Delaying the start date to when the work is actually performed, rather than paid for, is a sensible move, but it doesn’t address the fatal flaws in the legislation itself.

“This minor amendment will be little comfort, therefore, to the many contractors already being laid off by companies who are panicking about the approaching changes. We are still campaigning hard for the government to halt the IR35 changes while a full and independent review is carried out into the very serious risks for hundreds of thousands of contractors, the businesses they work with and the economy as a whole.”

Also commenting on the amendment, Nick Woodward, CEO and founder of ETZ Payments, a back-office payment solution for the recruitment sector, said: “This clarification from HMRC helps businesses and workers plan ahead for the implementation of the rules in April. The concern is that the confusion around the changes to the rules up to this date may mean some have buried their head in the sand rather than taking action. Over the coming months, we will be continuing to work hard to ensure that recruiters, workers and companies are up to speed with the rules and become compliant as quickly as possible and avoid any future complications or penalties.”

Chris Biggs, managing director of accountancy consultants Theta, added: “Many firms who employ consultants, especially large companies employing 2,000, 3,000 or 5,000 self-employed workers, acted quickly to become compliant which in some cases, has left many concerned that their past work could be subject to the new rules. Fortunately, this announcement does provide more clarity for them, but more needs to be done to put the concerns of self-employed consultants to rest over the next two months.”

Seb Maley, CEO at contractor insurer Qdos, said: “The reform was due to apply to payments made on or after 6 April, which would take into account work completed in March. The government has now changed its mind at the 11th hour, so that changes will apply to payments made for work carried out on or after this date.

“The government claims it is taking ‘early action’, but with less than two months to go until the reform arrives, this is a last-minute change that could easily confuse businesses further – albeit a tweak to the rules that gives agencies and end-clients a few extra weeks to prepare.

“Most businesses impacted by reform have spent time and money making arrangements to take into account the original rules. Nonetheless, our advice to agencies and end-clients is to use this time wisely – communicate with the contractors you place and conduct well-informed and case-by-case IR35 assessments.”

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