We have previously covered the government's plans to apply pre-existing taxation changes for public sector contractors to the private sector. Specifically the IR35 rules for private sector contractors.
HMRC has now released an updated fact-sheet to give more insight into how these changes will be implemented from April 2020.
Contractors using a PSC (Personal Service Company) and working for a medium or large-sized organisation in the private sector will have their employment status judged by the organisation. Medium/Large organisations are those that turnover more than £10.2 million, have more than 50 employees or a balance sheet of £5.1 million.
From April 6th, these hiring organisations will provide contractors with a Status Determination Statement. This document shows what the employment status is classed as, and the factors that have gone into the decision. In some cases, the hiring organisation may require information from the contractor in order to produce a Status Determination Statement.
The statement could determine 'employed' status or 'self employed' status. We have produced an IR35 calculator to help illustrate how the determination could affect the take home pay on any particular contract.
Statements can be disputed and disputes are lodged with the hiring organisation by the contractor with a 45 day timeframe set for response.
There is currently a review ongoing into the implementation of these new off-payroll rules for private sector taxation. There is still a two month wait until the Budget where there will likely be discussion on the subject, but we do hope to see some more clarification leading up to the date of the 2020 UK Budget on March 11th.