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Autumn Budget 2018: Reforming off-payroll working in the private sector

Autumn Budget 2018:Reforming off-payroll working

In a welcome move, the Government’s proposed reforms have been deferred to April 2020.


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The lead option in the Government’s recent consultation on improving ‘IR35’ compliance – extending the 2017 public sector reforms to the private sector – will come into effect from April 2020.

The new regime will not apply to small businesses (which the Government intends to define in line with the Companies Act 2006 definition – broadly where two out of the following three conditions are met: turnover not more than £10.2 million; balance sheet of not more than £5.1 million; and not more than 50 employees).

These changes will see responsibility for determining whether an engagement falls within the ‘IR35’ regime moving from the worker’s Personal Service Company (PSC) to the end user. Where an employment relationship is deemed to exist, the end user of the services would be responsible for operating PAYE/NIC on payments made to those PSCs if it pays them directly. Otherwise, if the end user has contracted with an agency and the agency is paying the PSC for the services rendered, then the agency will be responsible for applying PAYE/NIC to those payments based on the end user’s ‘IR35’ determination.

The Government also announced that HMRC would work with stakeholders to improve its online Check Employment Status Tool (CEST), and improve its published guidance prior to the new rules coming into force. We agree that improvements to CEST and HMRC’s guidance are necessary to ensure businesses are able to comply with the new regime, and will continue to work with HMRC in this regard.
Whilst we welcome the Government deferring implementation of this change, there are nevertheless practical steps that many businesses can take now in the knowledge that the new rules will take effect from April 2020.These include:

  • Engaging with key stakeholders at an early stage;
  • Identifying the potentially impacted worker population;
  • Estimating the likely increase in costs due to Employers’ NIC and Apprenticeship Levy charges arising on workers who are deemed to fall within ‘IR35’, and potential changes in contractors’ rates; and
  • Developing and implementing new systems and processes to ensure ongoing compliance with the new regime (based on our experience of assisting public sector employers to manage similar change programmes, the timescale involved should not be underestimated).

A further consultation on the detailed operation of the new rules is expected in the coming months. This will inform the draft legislation that will be published in summer 2019.


Colin Ben-Nathan

+44 (0)20 7311 3363

Anne-Marie Robinson

+44 (0)121 3352726  

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