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May 29, 2018

Service with a Smile – Consultation on Off-Payroll Working (IR35) in the Private Sector

HMRC has launched a consultation on extending the off-payroll working (IR35) rules to the private sector.

This follows changes to the rules for public sector engagements in April 2017 which placed the burden of compliance upon the end client rather than the worker/intermediary.


As covered in previous blogs, the IR35 rules were introduced in 2000 to prevent individuals providing employment services to clients through an intermediary (e.g. limited companies or partnerships) in order to avoid or reduce PAYE and National Insurance contributions (NICs).

An engagement will normally be within the scope of the rules where the worker would be treated as an employee of the end client but for the existence of the intermediary.  These rules are targeted at ‘one person’ companies that work almost exclusively for one major client.

Where IR35 applies, the income of the intermediary is broadly taxed on the worker as if it were employment income and the intermediary is required to operate PAYE on this deemed employment income.

For contracts in the private sector, it is currently the responsibility of the worker/intermediary to operate the IR35 rules and determine whether they fall within the scope of the legislation.  However since April 2017, the responsibility for operating the rules in the public sector is on the end client (i.e. the public body).

The Consultation

The government's consultation includes a series of questions for stakeholders to understand the impact and feasibility of the proposed changes.  Interested parties are invited to provide their comments to the consultation.

The government maintains that no decision has been made about extending the public sector reforms to the private sector, however consultations can be seen as an indicator of the government's long-term intentions.  If the private sector reforms are enacted, then feedback from the consultation could help shape how the reforms are implemented.

The consultation closes on 10 August 2018 and further information may be found here.

If you have any doubts or queries regarding your employment status or services through your limited company, please contact a member of our team for a no-obligation chat.

Contact us today to discuss your tax requirements.
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