IR35 and the private sector

Changes to the off-payroll working rules, known as IR35, will be extended to private sector engagements in line with those in the public sector.

The reform has been delayed to April 2020, but contractors and businesses will need to start planning for the change now.

The IR35 rules are designed to prevent companies and workers gaining a tax advantage by using a personal service company to avoid direct employment and the resultant higher PAYE and national insurance liabilities.

The responsibility for checking a worker’s status will move to the business engaging the worker. The smallest businesses will be exempt. The definition of ‘smallest businesses’ is not yet clear, but it could mean up to 250 employees. Similar rules for public sector engagements came into effect in April 2017. The rules do not apply to self-employed people.

The government has also proposed a package of reforms to increase workers’ rights and intends to improve the employment status tests to reflect modern working relationships.