HMRC off-payroll working (IR35) guidance updated

*UPDATE: HMRC has published a briefing that gives further information on the reforms to off-payroll working rules and the support HMRC is putting in place to help organisations prepare.*

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.

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.