HMRC clarifies start of IR35 extension

Changes to the operation of the off-payroll working rules, or IR35, as they affect the private sector will only apply to payments for services provided on or after 6 April 2020, HM Revenue & Customs announced today.

Previously it was intended that any payments made on or after that date, to service providers operating through personal service companies who are deemed to be employees, would fall within the new rules, which require such payments to be processed through payroll and subject to taxes including employer national insurance contributions. Now, organisations will only need to determine whether the rules apply for contracts they plan to continue beyond 6 April 2020.

The rules, designed to make sure that individuals who work like employees but operate through their own limited company pays broadly the same income tax and national insurance contributions as direct employees, were applied in their present form to the public sector in 2017 and are being extended to all medium and large organisations in April.

HMRC said it had listened to businesses’ concerns over what payments the rules apply to and from when, and taken action early to give businesses certainty and more time to prepare to ensure the smooth and successful implementation of the reforms. 

The announcement was made ahead of the formal publication of a review into the implementation of the changes, which is due to conclude this month.

Guidance in the Employment Status Manual has been updated.