IR35 going ahead in April 2021

With the news that the off payroll measures in the Finance Bill have now passed through parliament, we now have certainty as to the content of the new IR35 rules and that they will apply from April 2021. The legislation will receive royal assent before the parliamentary summer recess, scheduled for 22nd July 2020.

The new IR35 rules will apply to supplies to medium or large companies moving the assessment of ‘IR35’ status from the contractor to a Hirer and making the hirer or recruiter responsible for accounting to HMRC for tax and national insurance, and therefore liable for incorrect assessment and unpaid taxes.

The new rules had been intended to apply from 6th April 2020, but were delayed for 12 months because of the pandemic. There had been criticism that a failure to provide finalised legislation by the original implementation date did not provide business with sufficient time to prepare. As a result, some businesses were reluctant to conduct status reviews, or made blanket decisions not to accept contractors.

Although the new rules may not be welcomed, particularly during such difficult times, the clarity does now allow businesses to move forward with certainty and a nine month lead in period.

Businesses should act now, by getting to grips with the new rules, communicating with clients and encouraging hirers to review status. Hirers should be assessing status on all new supplies and extensions, which have potential to go beyond April 2021, so that the correct commercial terms can be in place from the outset.

Recruiters should be considering not only how an outside “IR35’ decision by a hirer can be supported by strong contracts and project descriptions, but also whether alternative engagement options such as umbrella, or  PAYE  can be offered for engagements which fall within the new rules.

As recruitment law specialists, Lawspeed can assist with an understanding of the new rules, status assessments, and the risks, obligations and terms associated with alternative engagement models such as PAYE or Umbrella. Contact the Lawspeed IR35 team on 01273 236 236 or [email protected]

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