Preparing for the Private Sector IR35 Changes from 6 April 2021
The purpose of this volume of Tax Digest is to provide a balance between explaining the final version of the legislation applicable to IR35 in the private sector from April 2021, and sharing insights on practical issues arising from its operation, including tax and commercial risks and legal and operational issues arising.
Readers are also referred to Tolley's Tax Digest 207 (January 2020), in which Justine Riccomini examined the draft proposals as they were at that time.
Given the breadth of the subject matter, for the sake of expediency, this volume will focus on the terms of the final legislation and how it operates, rather than attempting to reconcile the final version to the first draft. However, it will draw out relevant comparisons between the existing IR35 rules, where workers must determine their own employment status and account for their own taxes, and the new rules where those obligations are moved to other persons in the supply chain.
The legislative references provided in this document are all final as at the time of writing, based on the Finance Act 2020, following Royal Assent on 22 July 2020. As we go through, I have signposted several areas where further refinements are currently under review; however, these should only reinforce how the legislation is intended to work as explained in this volume, as opposed to making any fundamental new changes.
In this Tax Digest
- Brexit – overview
- Purpose of this Tax Digest
- Introduction to IR35
- The new private sector rules and to whom they will apply
- The amount of deemed direct payment
- Transitional provisions
- Personal services v contracted out services
- Who is the client?
- Small or medium/large?
- Umbrella Companies, Agencies, Managed Service Companies
- Payments to an Intermediary
- Travel expenses
- Historic status positions under Chapter 8
- International scenarios
- Making a status determining statement
- Disputes over status determinations (the client-led status disagreement process)
- Determining employment status on first principles
- CEST: HMRC's online status determination tool and how it works
- What does taking 'reasonable care' mean in practice?
- Double taxation when compliance goes wrong
- Employment rights v employment tax: further discussion
- Other regulatory issues
- Preparing for April 2021
- Further reading: official publications