Treasury to clear up confusion with IR35 changes

Recent confusion around the status of umbrella companies in relation to the role of intermediaries in upcoming changes in IR35 should soon be cleared up, according to a written tax policy update issued last week.

“A technical change” to the off-payroll working rules will be made in the next Finance Bill, said Jesse Norman, financial secretary to the treasury, in the tax policy update. 

“This will ensure the legislation operates as intended from 6 April 2021 for engagements where an intermediary is a company. The change will correct an unintended widening of the definition of an intermediary, which went beyond the intended scope of the policy.”

Responding to the update, Dave Chaplin, CEO and founder of compliance solution IR35 Shield, said: “It’s encouraging that the Treasury has finally vindicated the conclusions we reached in September, namely that the Finance Act needed changing to cater for umbrellas. Hopefully we will see what those changes are very soon, because firms will be making decisions from January 2021. We will continue to work with HMRC to try and help them resolve this issue.”

Chaplin discovered the original issues and reported them to HMRC.

Crawford Temple, CEO and founder of Professional Passport, independent assessor of payment intermediary compliance, said: “We welcome the government’s intention to update the off-payroll working rules in the next Finance Bill. The errant clause that was pointed out by [Dave Chaplin] would have posed problems for umbrella firms and the entire supply chain. The new legislation that is set to go ahead in April 2021 will mean that more contractors will be seeking to work through umbrella models, allowing them to continue working on temporary assignments whilst enjoying all the employment rights and benefits that come with employment.”

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