The off-payroll working rules (sometimes known as IR35) only affect people working like employees and through a company. They are designed to ensure that individuals pay a fair amount of tax and NICs, regardless of the structure they work through. They do not affect the self-employed.
To address widespread non-compliance, the rules were reformed in the public sector to shift responsibility for assessing the individual’s employment status from the individual’s company to the public authority. The Government has monitored the public sector reform of the off-payroll working rules through independent research, engagement with the public sector and analysis of HMRC data.
Evidence shows the changes are having the desired effect. Compliance is increasing, with an estimated £550 million in additional employment taxes being raised over the first 12 months without damaging the flexibility of the labour market.
Following consultation, the Government announced at Budget 2018 that it will extend this reform to all medium and large organisations.
The Government listened to stakeholder views during the consultation, and decided the reform will not apply to the smallest 1.5 million businesses. Large and medium businesses will have longer to adjust, with the changes being introduced in April 2020. There are no plans to delay implementation beyond that date.
The Government consulted on the detailed operation of the reform earlier this year, and met over 100 affected businesses and their representatives. The Government is considering the responses to that consultation and will publish its response in due course.
The Government recognises the importance of contracting and the flexible economy. The off-payroll working rules do not affect the self-employed and will not stop anyone working through a company. Independent research in to the changes made to the public sector did not indicate any major disruption and there is no evidence that these changes will have an adverse effect on the flexible economy.