HMRC have now published their further consultation document on the proposals impacting on those workers engaged off payroll in the private sector. These proposals follow the changes introduced for the public sector at April 2017.

The consultation document was issued on 5 March 2019 and the period of consultation ends on the 28 May 2019

The consultation document proposes some changes to the arrangements we have seen in place in the public sector and the proposal is that any changes introduced from this review will be mirrored in to the public sector   It is proposed that the changes coming out of this consultation will be introduced at April 2020

The proposals are that those who engage workers and are considered a ‘small business’ will not be required to operate the proposed rules.  For this purpose, a ‘small business’ follows the Companies Act definition which covers:

1. Annual turnover - not more than £10.2 million

2. Balance sheet total - not more than £5.1 million

3. Number of employees- not more than 50

For businesses which are not corporates then they need to consider whether their turnover is above £10.2 million or have 50 employees or more

These proposed changes will create significant amounts of additional work for particularly the end client   It is concerning that this additional burden is placed at their feet rather than with the agencies or HMRC themselves. I am particularly concerned that under these proposals the client will not only have to determine whether based on the terms of the engagement it would be caught to IR35 but on making that decision it is proposed it would be required to share this with the contractor and parties within the supply chain. They would be expected to in addition set out the reasons for that determination which again is shared 

We are told that to help those making the determination the CEST tool is being worked on taking on board comments made to HMRC by those who currently use this tool. It will be interesting to see how the revised CEST tool will look and whether indeed it does address the criticisms we have seen of it to date. 

I am really concerned at the impact of these proposed changes on clients and I can see that by the possible statutory requirement to issue a determination to the supply chain it is going to see a repeat of some of the disputes we saw in the public sector at April 2017 when the decisions of the  end client was not considered right by the agency and led to in some cases debates over who was right. Surely it would be safer if those disputes could be addressed by HMRC who seem to have opted out of the process?

It is clear those who engage workers who will be the subject of these changes need to know to start to think how they will deal with the determination process. To make the determinations they will need to know not simply what the terms of the contract to be but how it works in practice. Engager will also need to consider how they deal with disputes to the determinations. It may be some may consider this all sounds like hard work and simply from April 2020 to no longer entertain these types of arrangement 

I really feel employers who have concerns about the likely additional workload need to make their views known to HMRC in the consultation process

Alastair Kendrick, Employment Tax Specialist