Today Philip Hammond presented his Autumn Budget.
By far and away the biggest announcement impacting the UK’s flexible workforce is the Government’s decision to roll out changes to IR35 in the private sector in April 2020, but only for contractors engaged by large or medium sized businesses.
We are pleased that the Government has listened to the feedback they received from all stakeholders following the consultation earlier in the year and accept that implementing such a significant change without significant disruption requires appropriate lead time. A further consultation is expected to be published in the coming months with draft legislation expected in the summer of 2019. This allows further time for more lobbying to help shape the rules into something more appropriate and fair for contractors than the changes we saw in the public sector.
The Government has delivered a 17-month lead time to allow businesses to adequately prepare. It is vital that this time is utilised and Brookson will continue to offer our support to our contractor clients, recruitment businesses and end hirers; we are well placed and prepared to support those in the private sector.
End hirers and recruitment business who continue to support genuinely self-employed contractors and make use of this extended lead in period stand to benefit significantly from this change, whilst those who are unable to manage their new obligations effectively could face serious commercial implications.
The Brookson Group has specialised in IR35 compliance for the last 18 years by both supporting customers with our all-inclusive IR35 review service and by being engaged by 40 Public Sector end hirers to help them manage the employment status of their flexible workforce. Our experience in this market place is unique and we will continue to help clients, agencies and our customers through the proposed reform changes.
The key change that we expect to take effect for all payments made to limited company contractors after 6 April 2020 (subject to the outputs of the forthcoming consultation) is a shift in the responsibility for determining employment status for limited company contractors. This is likely to mean that:
- It will no longer be the responsibility of the director of the PSC to determine their IR35 status when they are engaged by a large or medium sized business (yet to be defined) in the private sector. This will become the responsibility of the end hirer. We expect the current rules to continue to operate for engagements with small businesses.
- Despite this shift in who makes the determination on IR35 status the method by which status is assessed is not changing. If a contractor is outside IR35 today, they should continue to be outside IR35 post April 2020 if the end hirer has met their obligations
- The end hirer will need to exercise reasonable care when determining the IR35 position of any contractors engaged via a PSC.
- End hirers will need to implement an IR35 assessment process (either managed internally or with external specialist support) to ensure the status decision is correct. Clearly, blanket bans on the use of PSCs or blanket IR35 assessments should be avoided.
- Whoever makes payment to the contractor’s limited company (most likely the recruitment business) is responsible for ensuring the correct tax and national insurance is paid to HMRC.
Brookson have developed a service, utilising the 18 years of IR35 experience from our legal practice business, which has been designed to enable end hirers and recruitment businesses to prepare for and ultimately comply with this new legislation whilst ensuring that genuinely self-employed contractors continue to be taxed correctly. More information on this service can be found at www.brooksonlegal.co.uk
For further information on the other changes announced in today’s Budget impacting contractors, please download our Budget summary guide.