From April 2021 the rules for engaging individuals through personal service companies are changing. The responsibility for determining whether the off-payroll working rules (sometimes known as IR35) apply will move to the organisation receiving an individual’s services.

The Government has published its response to its review of changes to the off-payroll working rules. The Government has confirmed its intention to proceed with the reforms, which come into effect on April 2021. Announcements include:

• businesses will not have to pay penalties for inaccuracies in the first year, except in cases of deliberate non-compliance
• HMRC will increase its awareness-raising efforts, including webinars and guides, to support understanding of the rules
• HMRC has published a “communications pack” on the reforms
• the Government will introduce a legal obligation on organisations to respond to requests from agencies or workers about the organisation’s size – the significance being that small companies are exempt
• the Government will also update legislation to address concerns raised over the rules as they apply to off-shore companies
• the Employment Status Manual guidance has been updated in line with outcomes from the review
• HMRC has published a “self-help guide” – aimed at contractors and agency workers – on how to spot tax avoidance schemes. The guide looks at how to avoid entering into non-compliant arrangements
• the Government reiterates that new information from the changes will not be used to open investigations into Personal Service Companies for past tax years, unless fraud or criminal behaviour is suspected.

HMRC will commission external research into the impacts of the reform six months after implementation, including on how status determinations are being made.