March 18, 2020
Authored by: Katherine Pope, Caroline Belam and Tracey Hawksley
The extension of the UK off-payroll working rules to private sector clients, due to take effect from April 2020, has been delayed by one year. This follows growing calls from businesses and business leaders given the difficult and uncertain times faced by many in light of the coronavirus pandemic. This is a huge relief for many contractors and businesses but it is just a postponement. The extra time should be used wisely to prepare for the changes; given the year-long extension it is unlikely that HMRC’s promise not to be ‘heavy handed’ on penalties during the first year of IR35 will stand.
The delay may, however, put some in a difficult position. If, in anticipation of the new rules coming into force, it has already been determined by a private sector client that a relationship would be one of employer/employee if the intermediary was not involved, the intermediary (in most cases the contractor’s PSC) should seriously consider operating PAYE and account to HMRC for employer/employee NICs and employee income tax accordingly. HMRC previously stated that it will not carry out targeted campaigns into earlier tax years where a client determines that a worker would be an employee if engaged directly by the client. However, HMRC may see things differently if a determination has been made in relation to the current working arrangements, in anticipation of the new rules coming into force, and that determination is now ignored. Some contracts may also already have been re-negotiated on the basis of