Government IR35 Review: What’s Changing?

Although the IR35 reform will still go ahead on 6 April 2020, the government just published a review of the changes to the off-payroll working rules.

This review comes after stakeholders and business owners shared their worries about the IR35 reform and aims to reassure individuals that their concerns are being addressed. To achieve this, HMRC will ‘take a light-touch approach’ to penalties in the tax year of 2020/21, unless there is evidence of non-compliance.

Daniel Fallows, Director of Gorilla Accounting, is concerned the government’s review doesn’t meet contractors’ needs and wonders whether HMRC should forge ahead with the reform.

He said: “Whilst it’s encouraging to read that HMRC will take ‘a light-touch’ approach in regard to penalties and incorrect status assessments, we believe the government has not gone far enough with this review of the planned changes to IR35.”

The review published by HMRC concluded that the government will continue to have a dedicated team to deliver education on the off-payroll rules to customers, which will include webinars designed to provide support and working with customers to correct errors.

HMRC’s review also says the government will not apply its IR35 rules when a company is based overseas with no UK presence. In addition, HMRC will uphold their commitment to not using the change in rules to open compliance checks into prior years, unless they suspect fraud or criminal behaviour.

The review seeks to help business owners to pay the amount of tax and National Insurance Contributions due and to ensure that status determinations are correct. This has been a problem before, with HMRC losing many cases against contractors who chose to fight their status determinations (and subsequent tax bills) in a tribunal.

Mr Fallows believes there will still be issues going forward, especially because employers will have the financial responsibility of defining the employment status of a freelancer or contractor from 6 April 2020.

He said: “Ultimately, it’s the thousands of contractors and the companies that engage them that will be adversely affected.”

The House of Lords’ review started before the end of February and the results will be published in upcoming weeks.

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