IR35 consultation for sub-contractors

The Government has issued a consultation paper concerning a proposal to introduce a requirement for businesses to take responsibility for assessing the employment status of contractors they engage.

To date, the IR35 tax rules have left it up to individuals working as sub-contractors to determine their own tax statusand account to HMRC for any tax and national insurance contributions due.

However, under the new system, it will be for the engaging business to make the determination and to make the tax and national insurance contributions. The Government has been keen to emphasise that this is not a new tax and that the new rules will not apply to off-payroll workers providing their services to small private sector clients after April 2020.

Much of the consultation focuses on the practical implementation of the arrangements to ensure compliance, but also looks at the key issue of status determination. One of the key proposals under the consultation is to require businesses to provide reasons for their status determination to someone regarded as a sub-contractor. It is intended that the final decision on status determination will remain with the engaging business.

Employment status acknowledges the current issue of managing tax and employment law but no firm proposals have yet been put forward by the Government to resolve it.

With a year to go until the new rules are introduced in the private sector, now is the time for businesses to consider the potential impact. It is important to undertake an audit andidentify relevant individuals and their status. HMRC has created a tool to assist with this process, Check for Employment Status (CREST) – although in some instances this tool is not able to provide a definitive answer.

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