In July 2019, the government released the draft Finance Bill 2019-2020. The bill included draft legislation for the controversial off-payroll reforms in the private sector. Despite recently being under fire (after criticisms following an HMRC consultation with business leaders) the bill is set to proceed as previously expected – coming into force on April 6th, 2020. This is the key information you need to be aware of as we head towards the off-payroll reforms becoming law.
Off-payroll rules will come into force on 6th April 2020.
This is no surprise and has been the anticipated date for the legislation for some time.
Private sector clients will be responsible for assessing the IR35 status of contractors.
Clients will have to carry out a status determination assessment, which will, in theory, prevent blanket assessment of workers. Clients will be able to insist that contractors move across to their payroll.
The policy note states that there may be savings for contractors – who will no longer have to do their own determinations.
This is a controversial statement and it is unclear if there will be savings to be made.
A statutory ‘client-led status disagreement process’ has been introduced.
Calls for an independent appeals process have been ignored and contractors will only be able to appeal to the client directly.
The government note that they do not expect any significant economic impact as a result o
f these changes.
This is not backed by FCA research which estimates 13% of contractors will quit – some 76,000 individuals.
Small businesses will be exempt from the legislation.
This refers to small businesses as defined by the Companies Act 2006 – a company will not be defined as a small business if it has a turnover of more than £6.5M, a balance sheet of more than £3.26 million, or more than 50 employees.
Clients will have a duty of reasonable care.
A status determination statement will be invalid if a client has failed in this duty of care.
There is nothing shocking in the draft bill, but it will do little to appease calls of delay and reform from contractors, private sector clients, and other stakeholders. Clients must, however, begin to prepare for the changes as they are laid out today, in order to avoid being in breach of the legislation come 2020.
The draft bill will be under consultation until the 5th September with measures included in the next Finance Bill.