IR35 “off-payroll” rules to be extended to private sector

Very controversially, the Government have decided to extend the rules for personal service companies in the public sector to workers in the private sector from April 2020.

This follows a consultation in Summer 2018 on how to tackle non-compliance with the intermediaries legislation (commonly known as IR35) in the private sector. The legislation which has applied in the public sector since April 2017 seeks to ensure that individuals who effectively work as employees are taxed as employees, even if they choose to structure their work through a company. There will be further consultation on the detailed operation of the rules, and small businesses (yet to be defined) engaging such workers will be excluded.

This will represent a significant administrative burden on large and medium-sized businesses who will be required to decide whether the rules apply to payments to such workers and deduct tax and NICs.