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Published 5 December 2017
In April 2017, the Government reformed the off-payroll working rules (known as IR35) for engagements in the public sector, requiring public sector engagers to look through personal service companies when applying the employment status tests, and therefore more frequently being required to operate PAYE. The Government announced in the budget that there will be a review into whether the private sector engagers should follow where the public sector has led (and our best guess is this will happen to 'iron out unfairness' with effect from April 2019 or 2020).
In the budget the Government also announced there would be a second review to explore a way to make the employment status tests for both employment rights and tax clearer. This is not an impossible task but will certainly not be an easy one. We await with interest how they will deal with mutuality of obligations, substitution rights and the underlying worker's financial risk.
It is early days for these proposed reforms. However, it seems likely that (given the back drop of the raft of employment status cases and these proposed reforms) HMRC's interest in employment status will pick up substantially. Employers should ready themselves for this, and the proposed reforms, by considering a review of their engagement practices, making sure they have a clear understanding of their own fact pattern, so that they can understand risk areas.
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