Rules for business off payroll working (IR35) from April 2020 explained by ESB Accountancy
Legislation has been published in draft which extends the off-payroll working rules as they apply to end clients in the public sector to large and medium sized end clients in the private sector.
The rules apply where workers supply their services via an intermediary, such as a personal service company, to an end client which is a large or medium private sector organisation. Companies Act 2006 definitions are used to determine whether an organisation is large or medium sized.
The rules shift responsibility for determining whether the off-payroll working rules apply and, if they do, deducting tax and National Insurance from payments made to the worker’s personal service company, from the worker’s personal service company to the end client to whom the services are supplied.
The amended business off payroll rules do not apply to small organisations, which will continue to apply the IR35 rules as now.
Under the IR35 rules, a 5% deduction is available to reflect the cost to the personal service company of administering the rules. This will not be available from 6 April 2020 in respect of engagements with medium and large organisations.
The draft legislation is available on the Gov.uk website at www.gov.uk/ government/publications/rules-for- off-payroll-working-from-april-2020, together with a tax information and impact note and explanatory notes.
Comments on the draft legislation are sought by 5 September 2019.
The legislation makes changes which cover the existing IR35 rules and the rules as they apply from 6 April 2017 to public sector end clients.
The existing IR 35 rules will continue to apply where services are provided via an intermediary to an end client that is outside the public sector and is small.
The rules are extended to include large and medium sized end clients in the private sector and are amended so that they work for both the private and public sector. Companies Act 2006 definitions are used to determine whether an organisation is small. The changes in the rules apply from 6 April 2020.
If you don’t currently use software, or your software won’t be MTD-compatible, you’ll need an adviser who can file your VAT returns on your behalf.
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