Philip Hammond announced in the Autumn Budget Statement that the IR35 reforms introduced into the public sector in 2017, would be extended to some areas of the private sector from 6th April 2020.
IR35, also known as the ‘intermediaries legislation’, is a set of rules designed by HMRC to ensure that people who offer their services to a client via an intermediary, such as a limited company, pay the same tax and National Insurance as people employed by the client to do the same job on a salaried basis.
HMRC introduced controversial IR35 rules for the public sector in April 2017. Instead of the contractor having responsibility for determining their employment status, the client or hirer now needs to make the call. They would be liable for any missing tax if they got the decision wrong.
HMRC have a tool Check Employment Status for Tax, CEST, that clients and hirers can use to assess someone’s employment status. However this has had some mixed response and while CEST may be making hirers’ lives easier, but it is not promoting compliance with IR35.
In the IR35 court case that HMRC recently lost, the Judge also questioned HMRC’s interpretation of MOO into question. MOO, a piece of employment law referring to an employer’s obligation to provide work and pay for it, and an employee’s obligation to personally do the work. She said that while there was MOO, it didn’t mean the working relationship was one of employment. Since 2000, HMRC has won 12 IR35 cases, but taxpayers have won 12 too.