HMRC off-payroll working (IR35) guidance

*UPDATE: reforms to the off-payroll working rules have been delayed by one year* 

HMRC has updated its guidance on off-payroll working. From April 2020 the rules for engaging individuals through personal service companies are changing. The responsibility for determining whether the off-payroll working rules (sometimes known as IR35) apply will move to the organisation receiving an individual’s services.

Small companies will be exempt which will mean a large number of charities will be excluded. The Companies Act definition will be used – to be small a company must meet two of the following conditions

  • annual turnover must be not more than £10.2 million
  • the balance sheet total must be not more than £5.1 million
  • the average number of employees must be not more than 50.

In response to consultations on this issue, CTG has argued that the definition of turnover should exclude donation and grant income – HMRC has now confirmed that this is the case.

CTG hosts a number of commentaries on IR35/off-payroll working:

We understand that a number of charities are now being contacted by HMRC (most likely through their Customer Compliance Managers) inviting them to take part in an educational call regarding the off-payroll changes. Charities that expect to be caught by the off-payroll working rules should look out for a Off Payroll Working Letter like this and an associated “readiness” for off-payroll working questionnaire.

*UPDATE: The Government is launching a review of changes to off-payroll working rules to address any concerns from businesses and affected individuals about how they will be implemented. The review will determine if any further steps can be taken to ensure the smooth and successful implementation of the reforms, which are due to come into force in April 2020. The Government has also published draft legislation to implement these changes*

Off payroll working guidance

Guidance notes include:

  • Understanding off-payroll working (IR35): Off-payroll working rules for clients, workers and their intermediaries.
  • Prepare for changes to the off-payroll working rules (IR35): Find out how to prepare for changes to the off-payroll working rules from 6 April 2020. Advice given on how to prepare includes:
    • Look at your current workforce (including those engaged through agencies and other intermediaries) to identify those individuals who are supplying their services through personal service companies.
    • Determine if the off-payroll rules apply for any contracts that will extend beyond April 2020. You can use HMRC’s Check Employment Status for Tax service to do this.
    • Start talking to your contractors about whether the off-payroll rules apply to their role.
    • Put processes in place to determine if the off-payroll rules apply to future engagements. These might include who in your organisation should make a determination and how payments will be made to contractors within the off-payroll rules.