Off-payroll roll-out

During the General Election campaign, Sajid Javid (currently Chancellor of the Exchequer) made a rash promise on Radio 4 that the off-payroll rules (IR35) would be reviewed.

After the Conservative Government was returned with a comfortable majority a review was announced into the implementation of the off-payroll rules, which will conclude in February 2020. This indicates that the extension of off-payroll working rules from the public sector, to all large and medium-sized private sector engagers, will happen from 6 April 2020.

It is possible that some tweaks to the implementation will be announced as part of the Budget statement on 11 March 2020, but its unlikely that anything fundamental will change.

The only option now is to help our clients prepare as best they can. Some engagers are requiring all contractors to join their payroll as employees. If our client is given this ultimation (go PAYE or go home) you may need advice on how to close down your personal service company (PSC) in the most tax efficient manner.

Where the PSC holds a good level of cash reserves our client may want to liquidate it and use entrepreneurs’ relief (ER) to tax the resultant gain at 10%. However, this is another area where the Conservative manifesto promised a review and reform, so it is possible that the ER rules will be amended from 6 April 2020, or even from Budget day.

Last week HM Treasury issued a two-page factsheet for contractors, which is next to useless. It says the contractor does not need to take action before April 2020, which is clearly wrong.

Clients should be talking to their engagers now about the off-payroll reform to find out what sort of information they need to make a fair determination of employment status.

Although the CEST tool has been revised, it is still not adequate according to employment lawyers, as it does not consider the mutuality of obligation (MOO) test.

Written by the Tax Advice Network