Last month the government published both the results of its latest consultation on IR35 and the draft legislation. So with time to digest, any surprises?
No, not really. But we now have some greater degree of certainty as to how the new rules will apply. Here are some key points:
Is it definitely happening?
Anyone who still nurtured a lingering hope that a government in difficulty enough on so many other counts might change its mind on this one will be disappointed. The private sector will be brought into line with the public sector with effect from 6 April 2020. The changes will apply to payments made from that date, meaning that it will be relevant to pre-existing contracts as well as new ones. In other words, end-user clients will need to determine whether IR35 applies to any of their existing contractors as at 6 April 2020 as well as any new ones taken on after that date. If you want to amend your contracts and/or PSC contractor practices, therefore, now is your moment.
IR35 status determination
The end-user will need to decide whether each of its PSC contractors would have been an employee if engaged directly (i.e. without the PSC). The end-user will then need to provide a "status determination statement" to both the party it contracts with (e.g. an agency or the PSC itself) and the individual worker. The statement must include the result of the determination and explain the reasons for that conclusion. End-users will need to consider carefully how they set out their reasons in the statement in a way which both satisfies the legislation and minimises the risk of disputes (see below).
Each party in the chain (if there is one) will then need to pass on the determination document until it reaches the entity actually paying the PSC. A party which fails to pass on the assessment in this way will potentially be liable for any PAYE/NI due under IR35.
The draft legislation provides that if either the person paying the PSC and/or the worker makes representations that the end-user's determination is incorrect, the end-user must consider its determination again in light of those representations and within 45 days either change it or give its reasons for deciding that its original determination was correct.
This is good news for end-users in that they do not have to implement any more involved process to deal with disputes. However, it is bad news for contractors/agencies who were hoping there would be a right to challenge that...