Soft landing approach confirmed for off-payroll working rules

The government has published the findings of the review of the new rules for off-payroll working in the private sector and, short of a few minor changes, confirmed these will go ahead on 6 April 2020.

The review was instigated by former chancellor Sajid Javid but considered only the implementation of the changes. Apart from the soft landing, announced at the weekend by current chancellor Rishi Sunak, little of note has changed. The government confirms that:

HMRC also lists the steps it has taken to help businesses prepare. This includes guidance and updating the check employment status for tax tool – since its launch in November, HMRC claims the tool has been used more than 230,000 times and feedback has been ‘largely positive’. The department has also produced a contractor factsheet and education programmes with webinars and workshops. It has established a dedicated director-led team with resources focused specifically on education and support to help customers prepare for the reform.

Annie Gascoyne, CBI director of economic policy, said: ‘After months of consultation on IR35, businesses will welcome the fact there is now finally some clarity on the situation.’

On the promise of a six-month review, she said: ‘It’s important that the review includes a full and comprehensive impact assessment, properly assessing the admin burden for business and the impact on labour market flexibility.

Ultimately, Ms Gascoyne is calling for a ‘holistic review’ of the employment tax system ‘because there have been too many sticking plasters over the years’.

On the new legal obligation on contracting organisations to respond to a request for information about their size from an agency or worker, RSM employer solutions partner Susan Ball said: ‘This might be useful to help every party to understand their position, but it is unhelpful to have new obligations introduced at the 11th hour.’

Overall, she found little new in the review and added that those hoping for wholesale change would be disappointed. ‘On the other hand, those organisations and individuals who have done the necessary prep work prior to the rules coming into force in April will be relieved that the goal posts haven’t moved,’ Ms Ball said.

Brian Palmer, AAT tax policy adviser, said: ‘The AAT believed that further delay had little realistic chance of being delivered. We’re therefore pleased that the government has instead confirmed that there will be a soft landing period until April 2021. This means that if employers or contractors have taken reasonable steps to comply but get something wrong, HMRC will not be pursuing them with fines and penalties, which should provide some much needed reassurance.’

Referring to the adequacy of HMRC guidance on the new regime, BDO tax partner Paul Falvey said: ‘At BDO we conducted a survey of about 650 businesses from around the country, in which 52% confirmed they either feel unprepared for the upcoming changes, or feel somewhat ready but would have benefited from more HMRC guidance. Less than half of respondents (38%) confirmed that their system for defining contractor employment status is in place, which strongly suggests that HMRC still has some work to do ahead of April.’

Separately, in the recently published minutes of its August IR35 forum meeting, HMRC stated it has agreed to expand the published note to clarify its position on mutuality of obligation – one of the main topics discussed in the meeting. The delay to the publication of the minutes was due to errors in the original draft which HMRC initially failed to correct, but later amended on members’ insistence.