IR35: Latest Proposal To Launch New Off-Payroll Working Rules In The Private Sector From April 2020

Recently, on 5^th March 2019, HMRC launched its latest consultation for the proposal to introduce off-payroll working rules to the private sector. As per 2018 budget, government has already announced its intention to make these rules applicable in April 2020. As per this latest consultation, HMRC is looking for the feedback on this proposal to ensure that the proposal launched is suitable for private sector or not.

The launched proposal intended to provide off-payroll workers & organisations with the greater possibility of the following –

• Obligations & responsibilities of the various parties involved in the supply chain.
• How the off-payroll working rules will operate from 6th April 2020.

The latest consultation also adds that the UK government understands that many of the organisations will be interested to start the preparations as these changes will impact the private organisations in April 2020. Therefore, private organisations can start preparing for this reform much in advance as mentioned in the education and support section of this document.

It seems likely that most private sector contractors will be impacted by April 2020 changes as most of the private contractors are working for large clients.

Stakeholder Feedback On Off-Payroll Working Rules

The next question which strikes in the mind is – will government act on stakeholder off payroll feedback?

“According to contractor calculator CEO, Dave Chaplin, this proposal looks like a plan to copy & paste all existing public sector rules into the private sector.” but as per HMRC, it is the best suitable option.

Previously, HMRC launched three proposals for the reformation of IR35 in the private sector and seeks feedback on it. According to opinions of some peoples, Stakeholder’s just viewed the proposal as a formality whereas HMRC’s summary of responses concluded that majority of peoples said that extending the off-payroll rules was the most suitable option. In response to the feedback, government announced its intention to make certain concessions which includes exemption for small businesses but many serious concerns were ignored or dismissed at that time as per feedback of the respondents.

Now recently, again on 5th March 2019, a consultation has been launched within a gap of less than 10 months after the three proposals for the reformation of IR35 in the private sector. Therefore, the big question which arising in mind of many people is – whether this time government will sincerely listen to the feedback of the respondents or whether it will simply treat this as another box to tick ahead of April 2020.

As per the case with the previous consultations, this time respondents will raise many issues comparing it with the latest consultation. If government is determined to apply these rules in the private sector, respondents will also try that their opinions should be heard properly.

RESPONDENTS CAN PROVIDE FEEDBACK UNTIL 28 MAY 2019

Antibusiness Proposals Can Damage UK Plc

The most common criticism I found against the proposal is of “Contractor Calculator CEO, Dave Chaplin” who says that HMRC expects that the previous success of public sector rules will automatically translate into the private sector too. Public sector & private sector both are different and they should be treated differently.”

There are many important differences between the public & the private sector. In the private sector, companies are trying their best to grow, have values and listed on stock exchanges. There is a prominent role of contingent workers in the growth of private organisations. Contingent workers include freelancers, independent contractors, consultants or other out-sourced and non-permanent employees. Contingent workers are considered as experts in their respective fields.

The structure of the new rules may result in arising of the following problems –

1. Rapid build-up of uncertain tax risk on company’s balance sheet which will be equivalent to 50% of contingent workers annual hiring cost.
2. It may reduce the company’s value.
3. It may force the company into bankruptcy, if any subsequent investigation is done by HRMC.

Therefore, for some private contractors who are planning to start a company, the latest legislation raises a sign “Not to start a company here until the IR35 status is confirmed with the client”.

Conclusion

Irrespective of any sector, this is a very complex issue which should be handled carefully as this will impact the entrepreneurial economy of UK and may consequently damage UK Plc too.

Also See: Outsourced Bookkeeping and Accounting

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.