Last Monday the announcement of changes to the IR35 legislation in the private sector revealed they are going to be similar to the ones implemented in the public sector in 2017. But how are these changes going to affect contract work?
IR35 in the Private Sector: delayed until April 2020
The surprise was the changes have been delayed by a year, due in April 2020, with a further consultation period early next year. With everything else the government is dealing with at the moment, we felt this was a welcome and sensible move.
In order to get our clients ready for this change, Morgan McKinley held an event at our offices on Tuesday 6th November in conjunction with Brookson Legal Services. Joe Tully (Managing Director) and Matt Fryer (Compliance Director) presented, among other things, on what will be changing, what is reasonable care and what firms can be doing to prepare for April 2020 and the changes to contract work. We all feel it is important to keep up the momentum with this and not leave it until the last minute before looking at managing the roll out, as some programmes could be a lot bigger than first thought.
Will the Government learn from the previous rushed rollout?
It was always certain that the government would make some reform to the legislation in the private sector, but it was unclear as to when it would happen or whether it would mirror the public sector. We hope the Government has learnt from rushing through the first one and has decided now to do its due diligence over an extended period, so it is rolled out properly in 18 months’ time. What we know for sure is that end hirers are being made responsible for assessing the employment status of the off-payroll workers they have onsite.
We also found out that “small” businesses (for example, less than 50 employees) are excluded from the change. So with this, will we see more PSCs looking to work at these smaller places, rather than the medium to larger ones?
HMRC tool not accurately identifying status of PSCs
There will also be greater emphasis on the “reasonable care” that the hirers must take. This term is one of the big grey areas out there as firms are unsure of what it means or what they must do, so hopefully this is addressed in the follow up consultation, giving more clarity around it. Whatever happens, private sector organisations should start to think about how they are going to tackle this and whether they are going to need to look for external expertise support.
“Putting policies and processes in place for after April 2020, so that every role is assessed properly and there is an audit trail of the decision making, would go a long way.”
There have been quite a lot of discussions around the tool “CEST” which HMRC built to help public sector hirers make decisions about whether someone was inside or outside. Around 15-20% of the time, the tool is unsure of the PSC’s status, creating quite a lot of uncertainty when using it. The Government is looking to make adjustments to this system so it is more compatible with the private sector when the changes come into play.
What should organisations do in preparation for April 2020?
General advice from Morgan McKinley and Brookson Legal would be to start an audit of your existing off-payroll workforce to see how big the project to prepare for this change is going to be. We expect most private sector businesses to have to undertake significant change programmes and would strongly recommend that these initiatives are commenced now. Given that we know what the basic principles of the rules will be, businesses should resist the temptation to postpone this project whilst they await the finer details.