We recently saw the publication of a report by HMRC on the recent review into upcoming changes to the Off-Payroll working rules. The report details some changes that have been made in response to the IR35 review.

Notably, the most significant changes to UK businesses detailed in this report include:

• Customers will not have to pay penalties for errors relating to off-payroll in the first year, except in cases of deliberate non-compliance;
• HMRC is confirming its previous commitment that information resulting from changes to the rules will not be used to open new investigations into Personal Service Companies for tax years prior to 6 April 2020, unless there is reason to suspect fraud or criminal behaviour;
• In response to feedback from the roundtables that an immediate change would be beneficial, the Government has already announced that the rules will only apply to services carried out from 6 April 2020 onwards;
• The Government will place a legal obligation on clients to respond to a request for information about their size from the agency or worker, and update the legislation to address concerns raised over the rules as they apply to offshore companies;
• HMRC has already published detailed guidance on the reform and clarified the position on a range of concerns raised, for example the client led status disagreement process, including by making explicit the time limits within which a disagreement can be raised. The Employment Status Manual guidance has been further updated in line with other outcomes from this review;
• HMRC has already published a factsheet to support contractors prepare for the changes and is continuing to step up its communications in the run up to implementation. HMRC is launching further products to support contractors in understanding the changes, including a self-help guide on how to spot tax avoidance schemes.

But what does this all mean?

hat does this all mean?Well, for such a complicated piece of legislation, the HMRC’s confirmation of a ‘light touch’ approach to IR35 is certainly a welcome sight. Most businesses have been working tirelessly to prepare for the change and it is only right that they are not held ransom for genuine mistakes that are made in the assessment process.

As such, we think this review reflects a positive and respectful decision for businesses and contractors alike, and reflects the HMRC’s understanding of the ongoing uncertainty, in part due to the delay in the spring Budget and the lack of detailed information.

In terms of what it means for recruiters directly, well the move to ensure that there is a legal obligation for businesses to confirm whether the rules apply to them (concerning the small business exemption) is again, a positive step forward. Many agencies have been concerned about how they will be able to accurately determine a client’s size, and therefore whether the new regime is applicable. An obligation for businesses to declare this information will definitely make life easier for recruiters.

And for contractors? Another important message in the details published is that HMRC have re-confirmed that they will not be looking at contractors’ tax statuses prior to April 2020 unless they suspect fraud or criminal behaviour. Hopefully this should provide some reassurance to those affected. This has been a key concern for contractors and has affected many decisions as to whether to accept assignments where the status is ‘inside’ post 6th April.

However, there is definitely a note of caution in the published response for any businesses who have not made the necessary process changes or have not yet implemented a compliant way of assessing and engaging flexible workers. Most importantly, businesses must not mistake this soft period as a get-out of jail free clause. HMRC has been clear that deliberate non-compliance will still be targeted under the ‘light touch’ approach and failure to prepare adequately could be self-sabotage.

The silver lining of IR35 for many businesses has been the opportunity to take a broader view of their talent community. Being receptive to a flexible workforce made up of different engagement models could be game-changing for those who have previously understood their only viable new hire options to be PSC or perm. For many businesses, this marks a new era of contingent resourcing and we are excited to see how this changes UK plc for the better.

• Victoria Roythorne is head of compliance & operations at independent recruitment firm Outsource UK. Founded in 1991 in Swindon, the company now has five offices across the UK, employing 80 people.