Is The Private Sector Ready For IR35?

August 20, 2019

Categorised in: Intermediaries Legislation, IR35,

As the 6th April 2020 looms, contractors will be well aware that the IR35 reform into the private sector is approaching fast. These rule changes will see the responsibility of determining IR35 status switch from the contractor to the fee paying party. With the impact of the public sector reform still evident, despite being introduced over two years ago, some contractors are worried about the impact it will have when introduced.

Earlier this year, the UK government was warned by MP’s to pay close attention to what effect the IR35 reform will have on the private sector. This is a result of contractors leaving projects within the public sector following the reform back in April 2017.

After the consultation, run by HMRC from the 5th March – 28th May 2019, responders were in full agreement that the private sector reform needs to be delayed, allowing adequate time to prepare for the changes. The bulk of responses claimed that implementing the reform in April 2020 will not allow businesses sufficient time to prepare. A good example of this is that firms need approximately 12 months to implement a new IT system and processes, and will not commit until changes have been legislated. As legislations are not finalised until November of each year, it has been suggested that April 2021 would be a more feasible date to roll out the IR35 reform.

The Check Employment Status for Tax (CEST) tool, which was developed by HMRC, has come under fire again. It was launched in 2017 as a guide to help businesses assess if they were classed as working within or outside IR35, however, it is reported only 85% of assessments are accurate, highlighting another reason why the reform should be delayed. A spokesperson from Ernst & Young (EY) said that “We consider that relying on the CEST tool, as it currently stands, cannot be justified under the law, based on a variety of issues that have not been resolved yet”.

A chartered tax body has called for October 2019 to be the deadline for HMRC to reveal the new CEST tool, allowing businesses a full six months to review their IR35 status.

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