The IR35 Legislation was introduced in 2000 to address concerns relating to individuals who supply their services via a Personal Services Company PSC instead of as an employee, and therefore avoid paying employee income tax and national insurance contributions.
These reform changes were made to the Public Sector in 2017, the government confirmed that the changes will now take effect from April 2020 in the Private Sector.
It is important to note that the legislation itself, hasn’t changed what has changed is who determines the status of the PSC, this is now the responsibility of the client who receives the services.
Hirers were slow to react and unprepared for the changes
Fee payers choosing to ignore the end hirer’s status decision
Workers not supported or communicated with, effectively resulting in large project delays
Move to Private Sector for impacted contractors with sector transferable skills
Debate over suitability of HMRC CEST Tool
BBC spent £1.5m in system changes and took over 6 months from implementation to comply
NHS initial ban on PSCs (followed by relaxation to assess on case by case basis)
Growth in use of umbrella companies for PAYE solutions and sometimes non-compliant off payroll models
There is a growing concern around claim for employment rights for affected workers - Confusion over “Reasonable Care” meaning
The potential financial penalties could be significant if incorrect steps are implemented
We anticipate this being a minimum of nine month change programme for hirers and fee payers
“Reasonable Care” is yet to be fully defined and unlikely to be until the IR35 reform is in motion, there has been a recent update of HMRC’s “CEST Tool”
A review used to determine the status of a contractors service
Our specialist IR35 consultants have been helping companies prepare for the new legislation and have a range of solutions that can help you become compliant.