2020 Private Sector IR35 Proposals – HMRC Launch Review


Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

HMRC Launch Review of the Controversial Private Sector IR35 Proposals

The government has announced a review of the implementation of the controversial private sector IR35 provisions.

The review will look at the implementation of the proposals and will…

“gather evidence from effected individuals and businesses to ensure smooth implementation  …  and will determine if any further steps can be taken to ensure the smooth and successful implementation of the reforms”.

April 6th 2020 – New Rules

The new rules apply from 6 April 2020 and although the review will be concluded in mid-February this looks like too little too late !

The rules only apply to medium and large companies, small companies are unaffected but contractors working  for small companies remain within the existing provisions  (which by HMRC’s own figures have been largely been ignored ).

The changes were initially implemented in the public sector and are believed to have caused disruptions in the marketplace with contractors either refusing to work for public sector employers or demanding significant increases in their charge rates.

This followed many public sector employers taking the view that a defensive stance should be taken, and a taxable position adopted as the default position.

In the private sector there are already strong indications of a similar stance being taken with several notable organisations (including banks) announcing that they are phasing out the use of contractors.

Small Employers & IR35 Claims

The private sector provisions do not apply to small employers (those who meet two out of three tests –  less than 50 employees, a balance sheet of less than £5.1m and turnover £10.2m) and this will again distort the commercial position as contractors may prefer to work for small employers.

There is possibly a sting in the tail of what appears to be positive news (although, as stated perhaps rather late in the day) and it has also been announced that…

“ the government will  explore whether there are any further steps it could take to support businesses in correctly determining employment status “.

HMRC has recently updated its much criticised CEST computer tool for determining status and whether this announcement indicates that HMRC are going to focus compliance activities on this contentious area remains to be seen.

For more information on off payroll working and IR35 proposals for the private sector, please feel free to contact a member of our helpful tax advice team, you can also read more about IR35 changes below.

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