Finally, the draft IR35 legislation has arrived that can address the off-payroll working rules in the private sector. The legislation was included in the Finance Bill 2019/20 and had a vow to forge ahead along with next April’s reforms.
This news comes as a disappointment for the contractor firms, particularly those who fought for the rights of limited company contractors and asked to postpone the off-payroll working rules for at least 12 months.
Meanwhile, Jesse Norman MP explained that from April 2020, rules will be introduced to make sure that two people who work together in similar positions for a single employer are required to pay similar taxes on their employment.
As the bill was unveiled by the Treasury minister, he said that in the past, the government announced that the compliance for the off-payroll working rules will be improved in each sector so they can be aligned with the public sector. The reform can allow companies to determine if the existing rules are applicable on their hired contractors and make sure that they pay the required employment taxes.
However, the draft reflects that the framework will not only affect the engagers but it will also involve other parties such as recruitment agencies; they can respond till September 5th.
The legislation also contains provisions that make sure that all the parties who belong to the labour supply chain know about the decision by their organization along with the reasons that lead them to the final outcome. In order to challenge the determinations by their organization, the government plans to introduce a client-led status disagreement process that can facilitate the fee-payers and individuals to appeal.
The proposal regarding the decision-making awareness may not be new, although the clients are needed to provide their IR35 reasoning to both the worker and the agency it contracts with in the span of 45 days.
On the other hand, the 20-page response also states that the industry follows a flawed approach that implies that the clients have any inducement to become risk-averse to make key decisions.
Mr Norman said that: “The government does not agree that there are significant incentives for deeming individuals to be employees,” it claims, despite acknowledging clients can be liable if they incorrectly deem ‘outside’ (but not ‘inside’).