Commentary on the new IR35 guidelines for contractors

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Update: at the time this article was written, the off-payroll (IR35) reforms were due to be implemented on the 6th April 2020. On the 17th March 2020, the UK government announced that it would be deferring the reforms to the 6th April 2021 to help businesses and individuals during the COVID-19 crisis. You can read more about this here.

Yesterday the government produced a new factsheet on the changes to IR35, this time aimed at contractors. The guidance up to now has focussed on the end hirers, perhaps understandably as they will bear new responsibilities from April 2020*, whereas contractors engaged by medium or large end hirers will have responsibility shifted away from them.

The factsheet confirms who is affected by the changes and what is changing, demonstrating once again that although you may pay additional income tax and NIC’s following the reforms if you have not applied IR35 correctly, HMRC will not use information resulting from these changes to open a new enquiry into earlier years unless there is reason to suspect fraud or criminal behaviour.

Whilst the factsheet shows that you do not need to take action before April, if your contract is likely to extend beyond April 2020*, you should engage with your end hirer now to understand how they will managing the changes. This may require rate negotiations or adjustments to contracts and working practices. Remember the work you complete in March will likely be impacted by the reforms if payment will be made post 6th April 2020*.

The guidance confirms that the reforms are under review at present however it is very unlikely that there will be any significant changes or delays. It has been confirmed previously and is referenced in the fact sheet that this is a review of the implementation rather than the reforms themselves.

Whilst there is nothing new contained in the document, it is good to see HMRC starting to provide guidance to contractors directly.