The April 2020 off-payroll (IR35) changes to the private sector represent an important challenge to the contracting industry.
What is IR35?
The Chancellor announced at Budget on 29th October 2018 that the government will reform the off-payroll working rules (known as IR35) in the private sector. This follows consultation and the roll-out of reform in the public sector. Responsibility for operating the off-payroll working rules will move from individuals to the organisation, recruitment business or other third party contracting with and paying the contractor (the “fee-payer”). Small organisations are exempt. The new rules are scheduled to come into force in April 2020.
Off-payroll working – How has IR35 changed?
IR35 itself has not changed but the way it is administered has. Currently, in the private sector, the person providing services through their own PSC (Personal Service Company) is responsible for deciding if IR35 applies. As highlighted above, from April 2020 this responsibility for operating the off-payroll working rules will move from individual contractors to the end-client organisation, recruitment business or other third party engaging the contractor - referred to as the “fee-payer” in the draft legislation.
Are all clients affected by the IR35 reforms?
This change will only affect medium and large private sector organisations as there is a “small company” exemption, the definition of which is based on the Companies Act 2006 definition of a “small company”.