HMRC has opened a second consultation on the implementation of IR35 contractor reforms.
Under the reforms, any organisations in the private sector hiring off-payroll contractors will also be responsible for handling any tax status disputes.
Due for implementation in April 2020, IR35 reforms will mean the organisations hiring these contractors will be responsible for any missed tax payments.
The second consultation is an exercise for HMRC to improve communication with the supply chain.
IR35 is intended to ensure that those individuals who work like employees of a company but are contractors, pay broadly the same amount in employment taxes, regardless of working structure.
Off-payroll working rules apply in cases where an individual provides services through an intermediary to the client.
In the past, the problem has been that the “worker” – supplied through an intermediary – does not have statutory employment status for employment rights purposes; this changed in the public sector in April 2017 when the government addressed non-compliance.
Work to do the same for the private sector came to prominence in the Autumn Budget of 2017, with an initial consultation published last August.
Once these responses were considered by the government, a further Budget announcement revealed that reform to the off-payroll working rules in the public sector would be extended to engagements in the private sector from April 2020.
Businesses have been advised to prepare for what their responsibilities will be once the reforms have been put in place; all private sector businesses will assume responsibility for deciding whether or not freelance staff or contractors should be taxed the way employees are.
Crucially, small and medium-sized enterprises will not be included in this.
In the consultation, the government has advised companies to review their HR and payroll systems so that any changes that are necessary have been identified.
Systems can then be brought up to date in preparation.
HMRC will publish a full summary once the consultation has concluded.