Anticipated changes to the IR35 rules
H. M. Government (“HMG”) published a draft Bill in July 2019 containing
proposals for changes to the IR35 rules (see the May 2019 blog on the
subject). HMG intends to bring those changes into effect very shortly (see
below) by including them in a new Finance Act.
Accordingly, the Guidance Note on IR35, Employment and Self-employment has
been updated and a useful set of checklists has also been added (all of
which you can see by clicking
here
). The Information Pages have also been updated and can be found
here
.
These items cover HMG’s proposed IR35 changes on the assumption that the
Finance Act will not differ from the draft Bill. However, somewhat late in
the day, HMG has, since January, been reviewing its proposals, it is
possible that there might be last minute amendments to the Bill, or, as a
number of organisations and many self-employed contractors would like to
see, a substantial delay in the introduction of these IR35 rule changes. In
the context of the recent Cabinet shuffle resulting in the appointment of
Rishi Sunak as the new Chancellor, lobbying to persuade HMG to suspend the
introduction of the changes has recently been stepped up. If not suspended
or delayed by HMG, the new rules will come into effect on 6 April 2020.
In the meantime, HMRC has recently confirmed a slight relaxation in the
phasing of the introduction of the new rules so that, in relation to the
private sector, the rules will apply only to payments for
services delivered from 6 April 2020, not to payments made from that date
for any services delivered before 6 April. We will only
know the precise position at some time between now and mid/late March 2020
– see below.
How best to prepare for the changes
.
As soon as HMG clarifies the precise IR35 rule changes to be made and the
date when they will come into effect, the Information Pages and Guidance
Note will be revised further if necessary. In the interim, we strongly
recommend that if you might be affected by IR35 changes you should assume
that they will be as per the IR35 changes outlined in the Guidance Note and
Information Pages, and that they will come into effect on 6 April 2020. We
also recommend that you now urgently review and make plans for those
changes, taking professional HR, tax and legal advice as necessary to
ensure that, as far as possible, you are prepared for them.
Tight timetable for implementing the changes
Delays to implementation of the 2019 proposed changes have
arisen due to Brexit, the general election, and the fact that a new Finance
Bill can only be passed after the 2020 Budget (on 11 March 2020 but this
might be delayed). Only after the Budget do we expect to see a final
version of the Finance Bill and then, in mid/late March 2020, a new Finance
Act. This will leave only a few weeks until its IR35 provisions come into
effect on 6 April 2020, assuming that HMG does not delay the changes until
later this year or 2021.
This tight timetable is problematic for anyone who might be affected by
IR35 rule changes since it is still possible that the IR35 provisions in
the Finance Act could differ from the current Finance Bill, and the final
version of the Bill will not be seen until late in the process.
Whether you are a worker who uses a PSC, or a client of a PSC, or an
intermediary between either of them, or an in-house or external adviser to
anyone who might be affected by the changes, this will be a cause of
concern and frustration because it is exceedingly difficult to plan fully
for what are, at the moment, still unknown possible final changes to the
current IR35 regime, and an unknown commencement date.
The contents of this Newsletter are for reference purposes only and do not constitute
legal advice. Independent legal advice should be sought in relation to any specific
legal matter.