IR35 enforcement to be lenient in first year

In April 2020, changes to the off-payroll working rules (IR35) will come into effect.

Who the rules apply to

You may be affected by these rules if you are:

  • a worker who provides their services through their intermediary
  • a client who receives services from a worker through their intermediary
  • an agency providing workers’ services through their intermediary

The rules apply when the worker would be classed as an employee if they were contracted directly. Consequently, tax and National Insurance contributions must be deducted from fees and paid to HMRC.

Chancellor Rishi Sunak has promised that during the first year of the implementation of off-payroll rules to the private sector, penalties for IR35 breaches will not be ‘heavy handed’.

Mr Sunak informed that there will be a soft-landing penalty period where HMRC will allow organisations to adjust to new measures. As a result, businesses and employees alike will have an easier transition period.

What you need to do as a client

You’ll need to decide the employment status of a worker, you must do this for every contract you agree with an agency or worker. You’ll need to:

  • pass your determination and the reasons for the determination to the worker and the person or organisation you contract with
  • make sure you keep detailed records of your employment status determinations, including the reasons for the determination and fees paid
  • have processes in place to deal with any disagreements that arise from your determination

Small-sized clients in the private sector will not have to decide the employment status of their workers. Therefore, this will remain the responsibility of the worker’s intermediary.

‘Giving people a year of lenience means that the transition to the new rules will be easier.’

Nigel Holland commented.