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Markel Tax

10 Jan 2020

‘Smooth’ move by Government on implementation of upcoming IR35 changes

The Government has announced a review of the implementation of the new IR35 rules as part of the Government’s New Year’s resolution to introduce the proposed IR35 changes to the private sector in April 2020.

In the run up to the general election, the Conservatives promised a review, ahead of the implementation of the off payroll working rules.  After their general election win they have taken the review forward. One could argue that this a rare occasion where a government sticks to what they promised during an election.

The review’s terms of reference are to consider the views of those directly impacted by the legislation to ensure the changes are implemented smoothly and successfully.

There is still no definite answer as to when the new rules will be introduced, although the tenor of the Chancellor’s comments about the review suggests that the review will be about how to introduce the changes, not whether the changes will be introduced; it seems likely that the original proposed implementation date of 6 April 2020 will stand.  This is unsurprising, as the government has estimated that an extra £3 billion will be generated from the changes.

The review will analyse the implementation of the public sector rules in April 2017 and the CEST tool. Perhaps the most notable mis-step in the public sector implementation was the ‘blanket’ approach taken by Crossrail, which led to workers to announcing their intention to terminate their contracts with Crossrail and contributed to the delay to the project.

The public sector experience raises the question as to whether rules of this type can ever be introduced smoothly. Contractors have already experienced setbacks: the majority of the banks have declared that they are no longer engaging with limited company contractors and other businesses following suit e.g. GSK.

Perhaps the biggest concern of all is the ineffectiveness of the CEST tool, which many end clients have been using to prepare themselves for taking on the burden of determining contractors’ IR35 status. Even though the CEST tool has recently been updated it misses out fundamental factors, such as mutuality of obligations, and does not distinguish between unfettered and fettered rights of substitution.

The review is due to conclude in the middle of February. Given the budget date of 11th March, it looks as though the Government will not be turning back on their election promises and we will finally hear some news of the long-awaited final legislation.

There is a concern is that this timetable will then give everyone less than a month notice to prepare for the changed IR35 regime, which may give the lie to the idea that the implementation will run ‘smoothly’.

If you are a contractor, agency or end client preparing for the upcoming changes and would like us to review your engagement, please contact our specialist team on 0345 0660 035 or by email at IR35@markel.com
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