Off-payroll working: draft guidance on the new regime published

Draft guidance on the new ‘IR35’ regime published

HMRC’s draft guidance should assist organisations prepare for April – what are the main points?


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From 6 April, medium and large private sector organisations, and all public sector bodies, must assess the ‘IR35’ status of engagements with workers operating through intermediaries (e.g. Personal Service Companies (PSCs)).

What do I need to know?

On 7 February, HMRC published draft guidance to help organisations prepare for the new regime.

Organisations will need to work through the detail of that guidance, consider what it means for their ‘IR35’ preparations and, potentially, adjust those preparations accordingly.

What are the main points to consider?

Organisations should consider the draft guidance in its entirety. However, there are four aspects that, in our view, should be considered with particular care.

When the new regime applies

The new regime was originally to apply to all relevant payments made after 5 April, regardless of when the services were received by the client.

A key announcement, highlighted in HMRC’s press release, is that the new regime will now not apply to payments made on or after 6 April in respect of services received by the client prior to that date.

This easement is welcome, and clients outside the public sector can now exclude from their planning any engagements that will have concluded prior to 6 April.

However, the draft guidance indicates that payments made on or after 6 April which relate to services received both before and on or after that date should be apportioned between the old and new regimes on a ‘just and reasonable’ basis.

Fee-payers could encourage PSCs to invoice separately for services provided up to and including 5 April to avoid having to apportion payments made on and after 6 April.

Contracted out services

An organisation will not be a ‘client’ for the purposes of the off-payroll working rules where it engages for fully contracted out services.

Whether an organisation contracts for a service, rather than merely a supply of labour, is a question of fact based on the commercial reality of the arrangements.

The draft guidance states that factors to consider include:

  • The nature of the engager’s business;
  • The nature of the service provider’s contract; and
  • The relationship between the worker, service provider and their customer.

In our view, this is likely to be a difficult area in practice, and HMRC’s guidance would benefit from including more examples based on more complex fact patterns.

Guidance on Status Determination Statements (SDSs)

The draft guidance on SDSs includes the following:

  • Advertising a role as being within or outside ‘IR35’ is not, of itself, sufficient to constitute an SDS;
  • There is no prescribed format or method for issue (the key point is that the client must ensure the worker is able to receive or access the SDS); and
  • The output from HMRC’s online Check Employment Status Tool (CEST), or a comparable tool produced by a third party, can form the basis of a valid SDS.

What is ‘reasonable care’?

Provided a client exercises ‘reasonable care’ when preparing an SDS, the payroll withholding obligations will, in summary, rest with the fee-payer at the end of the labour supply chain. However, if the client does not exercise ‘reasonable care’, the payroll withholding obligations sit with it.

The draft guidance includes the following examples of ‘reasonable care’:

  • Ensuring personnel who undertake status assessments are adequately trained and supervised;
  • Accurate use of an appropriate assessment tool;
  • Seeking professional advice where appropriate; and
  • Reassessing the status of an engagement after any material change in circumstances.

The draft guidance specifically gives applying ‘blanket’ determinations as an example of not taking ‘reasonable care’.

How can KPMG help?

Whilst, publication of HMRC’s draft guidance is welcome, organisations should bear in mind that this remains provisional prior to its finalisation.

Should you wish to discuss what the draft guidance might mean for your preparations, how KPMG’s suite of technology tools could support you to comply with the new regime, or how KPMG can help you prepare for the April changes more generally, please contact Colin Ben-Nathan, Director, KPMG in the UK, your usual KPMG contact or email

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