Posted by jonathanfullarton - April 16, 2020 11:26 am Off-payroll working rules (IR35s) – reform delayed until 2021

The Government has announced it is delaying the reform to the off-payroll working rules (IR35) from 6 April 2020 to 6 April 2021.

This deferral has been announced in response to COVID-19, to help businesses and individuals deal with the economic impacts of the pandemic. Please note, however, that this is a delay to the introduction of the IR35 reform and not a cancellation.

Private sector and third sector organisations

Contractors working through their own limited company and providing services to non-public sector organisations will continue to be responsible for operating the existing off-payroll working rules, which came into force in 2000.

Contractors will need to decide whether they are employed or self-employed for tax purposes for each of their contracts, and deduct the relevant tax and National Insurance Contributions (NICs). In 2020-21, organisations in these sectors will not need to determine whether the off-payroll working rules apply, issue status determination statements or deduct income tax and National Insurance contributions (NICs) before paying the fees for any contractors who work through their own limited company.

Contractors who work through their own limited company can continue to have their invoices paid gross of income tax and NICs by clients and agencies. Payroll need only be operated for individuals who no longer provide services for an organisation as a contractor through their own limited company but are now employed directly. From 6 April 2020, organisations may notice some additional functionality in their payroll software – the ‘off-payroll worker subject to the rules’ indicator in PAYE RTI.

Organisations in the private and third sector should not use this indicator, and should not use payroll software to make payments to a contractors’ own limited company. Agencies should only use this software for contracts where services are provided to public authorities and fall inside the off-payroll working rules. Public authorities

This delay means that the current off-payroll working rules in the public sector, introduced in April 2017, will continue to operate as they do now. The planned changes to the rules were due to bring in additional responsibilities for public authorities.

For the tax year 2020-21, public authorities will not be required to:

• produce a status determination statement (SDS) and pass it to the worker and the first party in the contractual chain

• have a status disagreement process in place.

These requirements will instead take effect from April 2021.

However, from 11 May 2020 there will be an additional requirement on public authorities, or agencies, for contracts, which fall inside the off-payroll working rules. The party paying the contractor’s company will be required to start using the PAYE RTI ‘off-payroll worker subject to the rules’ indicator in payroll software.

Whilst there is no requirement to start using the off-payroll worker indicator on RTI submissions from 6 April 2020, this function will be available and may be used from that date.

Further support Due to this delay

HMRC have advised that they will be pausing the customer support and education programme that HMRC has been delivering to help customers get ready. They have said that they will resume education and support activities at the appropriate time ahead of the reform in April 2021.