The extension of IR35 to the private sector follows a consultation earlier in the year though implementation will be delayed until April 2020 
and will only apply to large and medium sized businesses.
Under the reforms, responsibility for operating the off-payroll working rules will move from individuals to the organisation, agency or other third party engaging the worker.
According to HMRC, small organisations will be exempt, minimising administrative burdens for the vast majority and HMRC will provide support and guidance to medium and large organisations ahead of implementation. The government says it has learned from the public sector implementation and continues to monitor the impact of the public sector reform.
Tax receipts and independent research suggest that the reform has increased compliance and has not had a widespread impact on public bodies engaging flexible workers where it is in the best interest of both parties to work in this way.
The government has said it will ensure that organisations have sufficient time to prepare for the changes by implementing the reform in April 2020, rather than April 2019. This is in recognition of the need for organisations to set up systems to comply with the reform and review existing contracts.
HMRC’s approach to implementation and education will also reflect the views of stakeholders who called for education for the sector, including provision of guidance which addresses the needs of the diverse private sector market.
Further, the government intends to refine the design of the reform to help businesses to make the correct determination and ensure that they are not incentivised to make the wrong determination. For services provided to small businesses, the responsibility for determining employment status and paying the appropriate tax and NICs will remain with personal service companies (PSCs). Small businesses will not need to consider the employment status or deduct employment taxes from the fees of people they engage in this way.
The government intends to use similar criteria to define small businesses as is found in the Companies Act 2006. As a result, over 95% of businesses will not need to apply the reform, according to HMRC analysis.
The government says it is aware of concerns that businesses may use blanket decisions for the employment status of groups of workers in similar roles without recourse, should those decisions be incorrect, and intends to further explore options for the consequences of businesses failing to use reasonable care in making their decisions.
HMRC will publish detailed guidance and provide support and education to help businesses and taxpayers understand and implement the changes and will also set out what people should do when they do not agree with the business’ decision on their employment status.
