Businesses 'should continue IR35 prep' despite calls for review

Out-Law News | 04 Dec 2019 | 11:35 am | 1 min. read

Businesses should continue to plan for changes to IR35 off-payroll working rules despite pledges during the UK general election campaign by the main political parties to review the changes, an expert has said.

UK chancellor Sajid Javid told BBC Radio 4's Money Box programme that if the Conservative Party wins the general election the proposed changes to IR35 will be reviewed. The Labour party, the Liberal Democrats and the Scottish National Party have made similar promises in election campaigning.

Javid told the BBC: "I value the work of consultants and I want to make sure that the proposed changes are right to take forward."

Tax expert Penny Simmons from Pinsent Masons, the law firm behind Out-Law, said: "Businesses certainly didn’t gain any further certainty from the chancellor's comments and would still be advised to work on the basis that the proposed changes are going to be introduced as planned from April 2020."

The IR35 rules require that employment taxes be paid by people who provide services through a personal service company (PSC) if that person would otherwise have been regarded as an employee of the engaging business. Currently, where a private sector business engages a contractor through a PSC, liability to decide whether IR35 applies and to pay any employment taxes rests with the PSC.

The rules are due to change from 6 April 2020. From this date, engaging businesses will be made liable for determining whether the IR35 rules apply. They will also be required to operate PAYE and pay employers' National Insurance contributions (NICs). The changes will not apply to small businesses which engage contractors through PSCs.

Public sector engagers have been responsible for IR35 compliance since April 2017.

The chancellor said that a Conservative government would review the proposed changes to IR35 as part of a wider review of self-employment. He was asked if that meant it would 'put-off' the changes and he did not respond directly, saying that he did not want to pre-empt the review, but that it made sense to include the proposed changes as part of a review of self-employment.

Steps a business needs to take to prepare for the IR35 changes include identifying and reviewing current engagements with intermediaries such as PSCs and labour supply agencies, and putting in place comprehensive processes to determine the employment status of contractors. Businesses will also need to review internal systems such as payroll software, process maps, HR and on-boarding policies to see if they need to make any changes.

"It will be a huge waste of money and resources if businesses need to overhaul their processes only to have the changes abandoned at the last minute, at this point there seems little choice but to proceed as if the changes are going ahead," Penny Simmons said.