It’s been a year since the government rolled out off-payroll working rules for the public sector in April 2017. It is now in consultation to determine how the off-payroll rules might be adapted to the private sector.
Contractor representative bodies, IR35 Forum members, tax specialists and contractors are wondering when private sector IR35 reform will happen. Many have said it will likely not be until April 2020.
Currently, contractors who are off-payroll in the public sector can only have their IR35 status assessed by the public sector body providing the contract. If a contractor’s assignment is found to be inside IR35, they would have tax and National Insurance deducted from their pay at source like a regular employee.
IR35 Forum members asked for a delay in private sector IR35 reform in order to gauge the results of a full year of public sector rules. This includes evaluating the number of IR35 status disputes that could surface in the 2017/18 self-assessment season.
The IR35 Forum, which includes members from the Chartered Institute of Taxation, the Freelancer & Contractor Services Association and the Recruitment and Employment Confederation, among others, regularly meets with HMRC to discuss IR35 reform and its impact on the flexible workforce.
Some IR35 Forum members made it clear that they are disappointed with HMRC’s decision to prioritise private sector IR35 reform over other consultations such as those resulting from the Taylor review.
HMRC has suggested that IR35 for the private sector will be overhauled long before changes to employment status (based on the Taylor review) are made. It stated in the December 2017 IR35 Forum minutes that “there is a more immediate need” for a consultation to determine how IR35 reform would best be carried out in the private sector.
The government claims that the volume of contractors who should be classed as ‘inside IR35’ but are currently working ‘outside IR35’ is going to cost the Exchequer £1.2 billion by the year 2022-23. HMRC has been hinting at its frustration over private sector non-compliance for some time now, hence the speculation at an imminent change to private sector IR35 rules.
I work in the private sector – what should I do?
If you are currently working through your own limited company, outside IR35 and in the private sector, continue to do so as reform may not come into effect until at least April 2019. It is always recommended to have your contracts assessed by an IR35 specialist to ensure that you are correctly working outside IR35. Due diligence on your part will ensure that you are not held liable for backdated tax in the future – which is a possibility if HMRC were to decide your working circumstances were caught by IR35.
If you are concerned about your IR35 status at present, contact your accountant who can provide support and point you in the right direction.
In the meantime, contractor industry representatives are hopeful that HMRC’s imminent consultation on private sector IR35 reform is well thought-out, based on true evidence and is open-minded to the implications on limited company contractors.
Are you familiar with the off-payroll rules in the public sector? Visit our IR35 page for more information. Please note that there are no current changes to IR35 legislation or off-payroll working rules coming into effect, and no set date for changes in the future.
Contact us if you have any questions on contracting and the appropriate payroll setup based on your working circumstances.