ICAEW.com works better with JavaScript enabled.

HMRC announces changes to off-payroll working rules

12 February 2020: on 7 February 2020, HMRC announced changes to the draft off-payroll working (IR35) rules, which are due to apply to private and third sector engagements from 6 April 2020.

The off-payroll working rules will now only apply to payments made for services provided on or after 6 April 2020. Previously, the rules would have applied to any payments made on or after 6 April 2020, regardless of when the services were carried out.

This announcement comes as part of the government’s wider review into the implementation of the off-payroll working reforms, which was launched on 7 January 2020.

Although the formal publication of the government’s review isn’t expected to conclude until later this month, HMRC felt that it should take action early and announce this change to the rules to give businesses certainty and more time to prepare.

Much-needed clarity

Under the previous drafting of the rules, contracts relating to services carried out pre-April 2020 would still have been subject to the new reforms if the end client was medium or large, and payment was made on or after 6 April 2020.

This meant that certain contracts would have required IR35 determinations, even though the work itself would have been performed before the reforms had taken effect.

Now, organisations have an opportunity to draw a line in the sand: payments for contracts that end before 6 April 2020 won’t be in scope of the reforms, while payments for contracts starting on or after 6 April 2020 will be.

In cases where payments are made for services provided both before and after 6 April 2020, a just and reasonable apportionment should be made. This is discussed in further detail at ESM10001A of HMRC’s Employment Status Manual, which has been updated to reflect this change to the off-payroll working rules.

Further reviews ahead

In a separate development, on 4 February 2020 the House of Lords Finance Bill Sub-Committee launched an inquiry into the draft Finance Bill 2019/20, with a focus on the proposed reforms to the off-payroll working rules.

The Chair of the Sub-Committee, Lord Forsyth of Drumlean, noted that they were “interested in how this change [to the off-payroll working rules] will work in practice, and how it relates to wider changes in working arrangements”.

Once the inquiry has concluded, the Sub-Committee will make recommendations in a report to the House of Lords. The deadline to submit written evidence is 25 February 2020.