IR35 “Off-Payroll” rules to be extended to private sector

Very controversially, but as expected,  the Government has decided to extend the rules for personal service companies in the public sector to personal service companies in the private sector from April 2020.

This follows a consultation in Summer 2018 on how to tackle non-compliance with the intermediaries legislation (commonly known as IR35) in the private sector. The legislation, which has applied in the public sector since April 2017, seeks to ensure that individuals who effectively work as employees are taxed as employees, even if they choose to structure their work through a company. There will be further consultation on the detailed operation of the rules, and small businesses (as yet to be defined but we expect this to be based on turnover) engaging such workers will be excluded from the new rules.

This will represent a significant administrative burden on large and medium-sized businesses who will be required to decide whether the rules apply to payments to any such workers and deduct tax and national insurance.