Off-payroll working (IR35) rules
Changes to the off-payroll working (IR35) rules will take effect from 6th April 2020. This will affect all contractors who are currently working through a recruitment agency, personal service company (PSC) or directly will all large and medium sized companies.
The main change is that the end client in the private sector is now responsible for determining whether a contract is inside or outside of IR 35 rules. This has brought the rules in line with the rules currently effecting the public sector.
However, the rules will only effect medium to large businesses, so those companies defined as small business by the Companies Act 2006 will be exempt from the changes. It will still be the PSC to determine the IR35 status.
The end client will have to determine the IR35 status of a contract by providing in writing to the PSC a “Status Determination Statement”. This then means that the organisation providing the statement is responsible for the correct employment taxes arising from the contract. Thus the HMRC can recover any tax liabilities from the end client rather than the PSC.
HMRC has also removed the 5% allowance currently enjoyed by PSCs to meet the costs of administering the off-payroll rules.