So, the much anticipated consultation document on the extension to the private sector of the off-payroll working rules has been published. The 2017 reforms to the public sector are to form the ‘starting-point’ for the extension to the considerably more diverse private sector even though HMRC themselves regard those rules to have only ‘worked adequately’. HMRC accept that business will need some considerable time to implement the changes once their final form has been decided, however, there will be little opportunity to draw breath between the conclusion of the consultation period on 28th May 2019, the publication of the draft Finance Bill legislation in Summer 2019 and the reforms coming into force on 6th April 2020.
Everyone in the supply chain must therefore start to plan now to be sure they are both ready for what lies ahead in 2020 and can justify their assessment of current working practices.
At this stage we don’t know exactly what rules contractors in the private sector will be working with come April 2020, but what the consultation does show us is that HMRC wants all parties in the supply chain to have a role to play.
At first glance it also seems that the balance between those responsible for making the decision and those accountable for the accuracy of that decision (perhaps after a long enquiry) is not aligned. This is certain to create new tensions in the supply chain and a need for a single, integrated and agreed position between those parties becomes of paramount importance.
The increased administrative burden the proposals present mean that there are a number of general tasks all businesses should be addressing NOW in anticipation of the legislation landing later this year:
Senior Finance Personnel
Senior finance personnel need to take the lead to discuss and agree a strategy for the forthcoming changes. Responsibility for keeping abreast of the consultation and legislation when it appears needs to be delegated and there needs to be an assessment of the additional workflows which will arise. It will be important to assess whether external advisors need to be appointed to assist in making IR35 assessments once the rules come into force.
HR Personnel need to be kept abreast of the legislative changes to ensure that onboarding procedures for their contingent workforce are fit for purpose. Now would be a good time to conduct a review of all their contingent workers to establish the method through which they are currently engaged and identify business critical individuals.
Business relationships managers
Timely and accurate communication with all contractors currently employed is hugely important as you both seek to navigate your way through the changes.
Putting your house in order
It is important to remember that what constitutes being inside or outside IR35 is not changing, it is the person responsible for making the assessment that is changing under the proposals.
That said, for individual contractors currently operating outside IR35 in the private sector, now is a time more than ever before to ensure that your have your house in order.
Action needs to be taken NOW.
It is no secret that HMRC, not content with the ‘increasing compliance’ it has seen as a result of the 2017 changes in the public sector, has also embarked on an exercise to enquire into individuals who previously operated in the public sector via a PSC. They have a range of tools and powers to quickly identify and isolate potential “abuses” of the rules and will be aggressive in pursuing them.
Not only are HMRC known to be requesting additional information from public sector bodies in respect of individuals who are assessed by their end client and continue to operate outside IR35, they are also being asked to provide details of contractors who previously traded via a PSC but have since entered into employment contracts or umbrella company arrangements. The premise being that HMRC are seeking to open investigations into previous years which is at its least unsettling and at its worst costly and there is absolutely no reason to believe they will not adopt the same approach once the private sector reforms are in place.
Individual contractors currently operating via a PSC must therefore ensure that they have a comprehensive paper trail to support their decision to operate outside IR35. Irrespective of the fact that there are significant concerns surrounding HMRC’s Check Employment Status for Tax (CEST) tool, this should include making an assessment of the IR35 status of the engagement using the tool and retaining a copy of the result.
HMRC have made clear their intention to raise as much tax as possible from the contractor market and preparation is the key defence for individual contractors. If there is any uncertainty surrounding IR35 status a wise contractor would seek guidance and support from a specialist in the field immediately.
The clock is ticking and action is needed NOW.
Join us for a free public webinar
WTT has a wealth of experience in the contractor market and has specialist advisors to help you at all stages of the journey through the private sector reforms.
We invite you to join us for a public webinar on Wednesday 13th March at 6.00pm when we will discuss what is, and isn’t, covered that day by Philip Hammond in the Spring Statement and other issues of interest to anyone involved in the contractor market.
Please use the following link to join us: