New IR35 rules could be extended to the private sector by April 2019

In recent days, reports have emerged suggesting that controversial IR35 reforms which were introduced in the public sector in mid-2017 could be extended to the private sector by as early as next spring.

The news, which follows the latest IR35 Forum Minutes from HM Revenue & Customs (HMRC), comes not long after the Chancellor, Philip Hammond, confirmed that a consultation would be opened into the potential extension of the new off-payroll rules to the private sector in his Budget announcements in November.

First introduced in the public sector in April 2017, the new rules – which are aimed at countering tax avoidance – see that public sector end clients such as recruitment agencies or hirers are responsible for determining the IR35 status of the contractors they provide work to.

The reforms have proven largely unpopular with the contracting community, but HMRC has indicated that it hopes to press ahead with an extension of the new rules into the private sector due to the success of the new legislation in improving compliance.

An official excerpt from the November Budget documents read: “Early indications are that public sector compliance is increasing as a result [of the new rules], and therefore a possible next step would be to extend the reforms to the private sector, to ensure individuals who effectively work as employees are taxed as employees even if they choose to structure their work through a company.

“Therefore the Government will carefully consult on how to tackle non-compliance in the private sector, drawing on the experience of the public sector reforms, including through external research already commissioned by the Government and due to be published in 2018.”

Since then, new Minutes information has revealed that the Government’s consultation will be launched either before or during the Spring Budget in March 2018 – and will conclude before the autumn.

An announcement of proposed private sector changes is then expected to be revealed in the November 2018 Budget, which the legislation expected to be formally introduced in April 2019.