New UK rules on off-payroll working — also called ‟IR35” — will take effect for contracts entered into, or payments made on or after 6 Apr 2020. The rules will require medium and large organizations in all economic sectors to assess the employment status of individuals who work for them through their own limited company. Where the rules apply, the organization, agency, or other third party paying the worker’s company will need to deduct income tax and employee National Insurance Contributions (NICs), and pay employer NICs. 

The government introduced the rules into the public sector in 2018 and announced their extension to the private and third sectors from 2020. A consultation took place in 2019, and the measures were incorporated into Finance Bill 2019. Up to 60,000 organizations outside of the public sector will be within the scope of these reforms, and an estimated 20,000 agencies who provide workers to medium and large-sized organizations will have to operate payroll for any workers they supply who are impacted by the new rules.

On 7 Jan 2020, the government announced a review into the implementation of changes to the off-payroll working rules to ensure a smooth process. The decision to launch the review follows a commitment made during the UK’s recent election campaign. 

Related resources

Non-Mercer Resources

• Rules for Off-Payroll Working From April 2020 (UK Government, 11 Jul 2019)
• Finance Bill 2019-20 (UK Government, 11 Jul 2019)
• Government Off-Payroll Review (UK Government, 7 Jan 2020)

Mercer Law & Policy Resource

• UK Tax Proposals on Off-Payroll Work Progress (17 Jul 2020)