IR35 changes for the private sector

07 December 2018

The Autumn Budget confirmed that the proposed reforms to the taxation of personal service companies in the private sector will be implemented from 6 April 2020.

The new rules will apply to large and medium-sized businesses, and are expected to largely mirror those implemented from April 2017 in the public sector, with some refinement to be facilitated by a formal consultation over the coming months. This means that from April 2020:

  • the responsibility for undertaking employment status assessments could become the responsibility of the entity using the services of the worker
  • the responsibility for operating PAYE withholding will be that of the entity paying the PSC.

Whilst the implementation date gives some time to prepare for the changes, work will still need to begin now in order to prepare. Where internal project teams have already been established and an assessment of supply chains has taken place, the next significant step will be developing a policy over a number of important areas. These include cost and pricing decisions, how to manage status assessments, the communication process, dispute management, contractual updates/protection and wider governance.

For businesses at the start of the journey, confirmation that the change is happening will be the trigger to bring impacted stakeholders together to determine the way forward.

The scale of the challenge for organisations will depend on:

  • the organisation’s current visibility over the profile of its contractor population (direct personal service company engagement vs engagements via agencies) and for housing associations this will likely be varied and covering all types of contractors from consultants to maintenance and repairs workers
  • the number of off-payroll arrangements within the scope that will need to be assessed, which again could be significant for large housing associations
  • the number of interested stakeholders who will be impacted by the changes (procurement, tax, legal, HR, payroll etc.) and the organisation’s ability to make decisions quickly where in some cases priorities conflict.

There is a lot to do before the implementation date and whilst organisations will be comforted by the longer timeframe, starting now is strongly recommended.