HMRC announce amend to IR35 reform

What does HMRC’s tweak to IR35 reform mean for recruitment agencies and end-clients?

With less than two months until changes to the off-payroll working rules arrive, HMRC has announced a minor amend to the reform, which will mean the changes will now apply to payments made for services provided on or after 6th April.

Initially, IR35 reform was due to apply to payments made by the fee-payer to the contractor on or after 6th April, which would likely take into account work completed by the contractor in March.

As a result, recruiters and end-clients were advised to determine IR35 status and settle outstanding invoices before the date of reform. Otherwise a contractor transferred inside IR35 on 6th April would have had their March pay subject to PAYE despite having worked outside IR35 for that month.

Now the reform will not be retrospective. By this, we mean that determining an existing contractor’s IR35 status on 6th April will mean there is no crossover with regards to payments. In other words, should an already engaged contractor be deemed inside IR35 on 6th April, they will be paid up until this date as a genuine contractor.

HMRC has explained that it has introduced this tweak to give the private sector “more time to prepare”, ensuring that “organisations will only need to determine whether the rules apply for contractors they plan to continue beyond 6th April 2020.”

While this is technically true and the extra time granted by the Government will be welcomed by private sector companies and recruitment agencies - that will often handle payments to contractors on behalf of the end-client - these parties should use this time wisely.

The Government claims it is taking “early action” by introducing this change to the reform, but in reality, it is a last-minute tweak which does not alter the overall picture. Despite the ongoing IR35 review and the recently announced Lords Select Committee inquiry, the changes will be enforced on 6th April.

It is therefore vital that agencies and end-clients continue their preparations, communicate this latest development to the contractors they place and prioritise well-informed IR35 assessments.

With over 25 years’ experience, Qdos specialises in IR35 compliance. We conduct, on average, over 2000 IR35 status reviews every month and have handled more than 1,600 IR35 enquiries. We are working with over 200 agencies and end-clients to help them manage reform to the IR35 legislation.