AAT welcomes IR35 review findings

HMRC has published the findings of the Government review into the IR35 off-payroll working rules that are due to come into force in April 2020.

As expected, there will be no delay to the implementation of IR35 but a number of changes have been announced and a communications programme to better explain how the rules will operate in practice has been launched.

The key changes are:

• Customers will not have to pay penalties for inaccuracies relating to the off-payroll working rules in the first 12 months unless there is evidence of deliberate non-compliance
• HMRC will amend the legislation to exclude wholly overseas organisations with no UK presence from having to consider the off-payroll working rules
• The Government will legislate to place a legal obligation on clients to respond to a request for information about their size from an agency or worker

Association of Accounting Technicians (AAT) welcomed the changes, not least because the promise of a “soft landing” was a proposal put forward by the organisation.

Brian Palmer, AAT tax policy adviser, said;

“With the government having already previously postponed the extension of off-payroll working to the public sector and with just weeks remaining until implementation, AAT believed that further delay had little realistic chance of being delivered. We’re therefore pleased that the government has instead confirmed that there will be a soft landing period until April 2021.

This means that if employers or contractors have taken reasonable steps to comply but get something wrong, HMRC will not be pursuing them with fines and penalties, which should provide some much needed reassurance.”

Regarding the changes relating to overseas organisations and clarity on the size of employers, Brian Palmer added:

“The issue with overseas organisations had the potential to create significant complexity and bureaucracy so today’s clarification that they will be exempt is welcome.

Likewise, legislating to introduce a legal obligation for clients to respond to a request for information about their size will help concentrate employers minds and provide some reassurance to contractors.

“All in all, the package announced today might not be everything that everyone wanted but it’s certainly a step in the right direction.”