The application of the IR35 rules is due to change for contracts performed for large private sector clients from 6 April 2020. The new arrangements are referred to as “off-payroll working”, as that is how HMRC views the situation – a worker who should be paid through the payroll.
We outlined the changes in our newsletter on 29 August 2019. Since then HMRC has published its Issue Briefing on the reform of the off-payroll rules, but this leaves a lot of questions unanswered.
However, you can’t wait for HMRC to publish detailed guidance, we need to discuss the implications with you.
A first step is to ask whether the private sector businesses that engage them (ie your clients) are “small”, in which case their contracts are not affected by the off-payroll rules, or large – when their contracts will be affected.
The Tax Faculty Tax Guide 14/19 explains how to determine the size of the client. A good rule of thumb is – does the client need an audit? If yes, then it is not “small”. However, for marginal cases you need to look at the periods of when the business qualified as small or not.
If you want to read something written for you, rather than for an accountant, the IT contractor site is a good place to start. It is relevant for contractors working in other sectors as well.
The draft law for off-payroll working will be included in the next Finance Bill, which will be brought before the Parliament after the General Election. There is a real possibility that a different flavour of Government will throw out the proposals, or postpone the start date for another year.