IR35: only services provided after 6 April will be subject to new rules

Tax expert Penny Simmons of Pinsent Masons, the law firm behind Out-Law, said: "The announcement will be welcomed by business, since there had been concerns that the changes could affect services provided before 6 April if payment was made after this date".

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.

In January, the government announced a review of the implementation of changes to the off-payroll working rules. This review is due to conclude later this month.

"Today's announcement, although welcome, probably kills any residual hope that the Government's review would lead to a delay. This is probably the best offer that businesses and contractors alike are going to get from HMRC," said Simmons.

Draft technical guidance was also published today, which Simmons said would give business welcome clarity on many aspects on how the new rules are intended to work in practice and help organisations prepare for the rules.

"The publication of draft guidance is another welcome update and something that has been eagerly awaited by business. However, today's announcement and accompanying publications should also come as a final reminder to businesses that the changes to IR35 are just around the corner and preparations need to be finalised," said Simmons.