On 6 April 2020, IR35 will apply to the private sector. However, IR35 has been applicable in the public sector since 2017 and this month has seen some tax judgments which should give employers some guidance on how it will be implemented and interpreted.
For the uninitiated, IR35, is a means to tax off-payroll workers who personally provide work for an employer, usually by way of their own limited company. IR35 means the many people who provide services in this manner for tax reasons will now pay largely the same tax as a regular employee would.
As with all new law, it is difficult to get certainty on how it will be interpreted by the judiciary until a few proverbial canary cases have been down the judicial mine. Until now the most high profile case on IR35 was that of Lorraine Kelly who argued her presenting work was not performed by her personally but a character she portrayed to the nation.
However, further case law has given better insight. This month HMRC won a case against three BBC News presenters after it was held the BBC had used its position to encourage them to set up personal service limited companies to provide news broadcasting. As the BBC dictated what times and place the presenters would be working, and, the presenters had to perform the work personally with no right of substitution, it was held that IR35 and the presenters/BBC have been ordered to pay over £900k in owed income tax and NICs.
Essentially, IR35 is another form of employment status test. Unlike gig economy cases which often centre on low-paid workers trying to collect basic rights, IR35 focuses on highly paid staff trying to circumvent tax liability.