On 22 January 2020, HM Treasury launched a technical consultation on the draft secondary legislation for off-payroll working from April 2020.
The consultation will run for four weeks commencing on 22 January 2020 and ending on 19 February 2020. The next step is that responses to this technical consultation will be reviewed and the IR35 draft regulations will be revised as appropriate before they are laid before Parliament.
For more on this and the latest developments on what employer's need to know to get ready for the changes on 6 April 2020, see our insight IR35 private sector reform: Get ready for April changes.
The existing public sector restrictions and rules on off-payroll working (IR35) will be extended to medium and large private sector businesses from 6th April 2020. Under the new IR35 rules, instead of the individual contractor having responsibility for determining their own employment status for tax purposes, the responsibility for assessing the circumstances and making that determination will shift to the client or hirer.
As promised in the election manifesto, the Government commenced a review into the implementation of the IR35 changes in the private sector on 7 January 2020.
Yesterday, on 22 January 2020, HM Treasury launched a technical consultation of the draft secondary legislation for off-payroll working from April 2020.
As we predicted, the implementation date of 6 April 2020 remains. This new consultation focuses on the mechanism by which HMRC will recover unpaid PAYE liabilities from other relevant parties in the labour supply chain, namely the first UK-based agency in the chain, or alternatively from the client receiving the individual's services.
PAYE Income Tax liabilities will be recovered from a third party where:
- the fee payer (the party treated as making a payment of earnings to the worker's intermediary) has failed to deduct PAYE tax from payments made in relation to an off-payroll worker; and
- there is no realistic prospect of recovering the outstanding income tax from the fee payer within a reasonable period.
The rules will operate in broadly the same way in relation to national insurance contributions.
The consultation will last for 4 weeks, ending on 19 February 2020. The consultation includes the draft regulations, a technical note and a tax information and impact note.
The expected timetable of the post-election IR35 review has slipped a little as it was expected to be concluded by mid-February but the consultation only ends on 19 February. The next step is that responses to this technical consultation will be reviewed and the IR35 draft regulations will be revised as appropriate before they are laid before Parliament.
Employers who receive services from individual workers through an intermediary need to ensure that they are ready to implement the changes before 6th April 2020. Getting it wrong could result in significant liability for the unpaid tax. Organisations need to continue with their preparations for the introduction of the revised IR35 rules on 6 April.
To get ready for the changes, see our earlier insight IR35 private sector reform: Get ready for April changes in which our tax experts unpack the 'who, what and when' of the draft legislation and HMRC guidance and their potential impact on employers.
If you would like us to respond to the consultation on your behalf, we would be delighted to receive your feedback. Alternatively you can respond directly to firstname.lastname@example.org.