Publish Date

Jan 22, 2021

Off Payroll Reforms – so where are we now?

A&M Tax Advisor Update

In the third of our short series of Reward and Employment Tax articles for the end of the 2020 year and heading towards the U.K. 21/22 tax year, it would be remiss not to mention “IR35”.

Despite a motion to defer the off payroll working arrangements until at least 2023/24 and off the back of the Lords report into IR35, which was not very complimentary, the change in the rules for both the private and public sector are now within Finance Act 2020.

All official messaging points to the rules still coming in for work performed from 6 April 2021 onwards. HMRC has started its communications campaign and is running a number of online sessions to educate engagers and contractors on the various aspects of the rules. This gives everyone impacted exactly 10 weeks from today to introduce the new rules.

So where does that leave Engagers? 

For medium and large businesses who started their internal IR35 review projects last year, they will know the level of work involved and how IR35 cuts across a number of business functions. Now is not the time to sit back and hope another function will take the lead. A joint approach is invaluable, so that various workstreams can run in parallel to make the most of the remaining time available.

Engagers may have reduced their dependency on contractors during the lockdown, as indeed with casual workers and permanent staff. Others may have seen an increase, e.g. as interim support, IT projects as the population of home worker numbers exploded, or in additional delivery drivers as online shopping increased.

Many businesses are facing a huge mountain to climb in terms of recovery, and will be in a state of crisis management in the short term. This doesn’t leave much capacity to consider a strategic response to IR35 as part of a total review of manning and skills requirements for 21/22 and beyond. Engagers need to prioritise their limited resources to achieve what is necessary and build from there.

The way in which individuals have been working for their engagers has already shifted due to the pandemic, and this presents opportunities to enter into revised arrangements, which promotes flexible and new ways of working. It could also produce some interesting CEST results for future engagements as certain badges of trade are eroded but others enhanced. Do you, therefore, rely on last year’s results, or start again this year with your contractor population you plan to use from April?

Understanding what each party wants and expects from future arrangements will be key…