New IR35 Rules
In a statement about IR35 (off-payroll working) at the end of October 2019, HMRC has set out how it intends to manage and enforce new IR35 rules when they take effect on 6 April 2020. While there’s no change to the principles which determine if IR35 applies, from April 2020 the responsibility for deciding shifts from those doing the work to the business that pays them – but only if it’s a large or medium-sized business. In preparation for this HMRC is tightening its enforcement procedures.
The Application Of The New Rules
In a recent statement HMRC stated it has “…taken the decision that it will only use information resulting from these changes to open a new enquiry into earlier years if there is reason to suspect fraud or criminal behaviour”.
The reprieve from an enquire in to earlier years only applies if the information comes out of “…information resulting from these changes…” . Where you have previously decided IR35 does not apply to your contracts, HMRC’s statement means it will not investigate your decision if, following April 2020, the business you are working for decides it does.
However, should it be determined that you deliberately acted contrary to the law, e.g you falsified documents or facts to support your view that IR35 didn’t apply, you will be open to an enquiry into earlier years.
Keeping Records
In practice, the new approach will likely only apply in very limited circumstances. If you personally provide services to a client but invoice them through an intermediary (your company, partnership, etc), keep a record of how you arrived at your view that it didn’t apply. This can include results produced by HMRC’s check employment status for tax (CEST) tool.
