Freelancers' Questions: Where are we now with IR35 reform?

Freelancer’s Question: I see the off-payroll rules for the private sector in April 2020 have inspired a columnist for a Sunday newspaper to try to get to grips with the issues. Can an expert on IR35 bring us up to speed on where we are now and what’s next?  

Expert’s Answer: The problem is that we do not actually know (yet) the detail of the proposed changes. Announced at Budget 2018 was that HMRC and the government are planning to “refine the design of the reform” and “further explore consequences of businesses failing to take reasonable care.” They will also “improve the CEST tool”, while of course CEST remains the fundamental basis for IR35 decisions in the public sector. 

Plans cannot be accurately made until we have sight of the promised consultation document (expected February 2019), and certainly not until we see the draft Finance Bill in the summer. 

We have also seen another development in the form of the government’s response to the Taylor Review, published just before Christmas where they are suggesting the introduction of a statutory definition of self-employment. Self-employment and IR35 go hand-in-hand and depending on the timetable of these other issues, then the new rules could very quickly prove unnecessary. 

In the meantime, freelance contractors might need to take some action now to properly understand the IR35 status of their contracts in conjunction with their end-clients and in particular, establish now exactly what their take-home pay would be if IR35 applies, as this could be a life-changing reduction for some. 

Similarly, end-clients and agencies need to establish the extent of those potentially affected, including how they are going to deal with assessing many thousands of freelancers and contractors for IR35 and what new IT systems they will need to enable deductions for those assessed as 'inside' IR35. 

Even more worrying, arguably, is the impact of Brexit and the fact we could have a new government before the changes can be introduced.

The expert was Kate Cottrell, co-founder of IR35 advisory Bauer & Cottrell.

 

8th January 2019

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