IR35 – amendments in progress

Following representations to HMRC, it has now announced more detail of its intended adjustments to the Off Payroll Rules. This is to address wording in the legislation which has the unintended consequence of classing recruitment businesses supplying PAYE staff or employees as ‘intermediaries’ that are subject to the IR35 rules. The effect is to require hirers to treat payment to the agency as deemed employers so deducting PAYE and NICs from the payment to the agency, as well as accounting to HMRC for the deduction plus employer NICs. The wording has a similar impact on payments to employment umbrella companies.

HMRC has said that the outcome is entirely unintended and that it will revise the law. Towards that end, it has now provided some information regarding its policy intention and will be commencing a series of technical presentations this week with stakeholders including ourselves.

The confusion arises over application of the exemption for intermediaries in which the individual worker has no material interest (i.e. more than a 5% interest) or were already being paid wholly by way of PAYE. The legislation, as it stands, has the effect of negating these exemptions so that businesses in which the worker has no material interest are now treated in the same way as PSCs.

Whilst press comment has largely been around the impact on umbrella companies, the real impact will be on the supply industry as a whole, with contractor and PAYE businesses having to renegotiate rates and restructure finance whilst umbrella companies would inevitably also suffer.

Lawspeed has been in discussion with HMRC since this issue arose and will be participating in the upcoming technical presentations. The wording of the actual legislation, to be published in due course, will be crucial to ensure clarity – the devil is always in the detail! In the meantime, with HMRC policy at least clearly stated, businesses should continue to press ahead with preparation for April 2021.

On IR35 generally, see our recent article ‘IR35 made easy’, and for more information or advice contact Lawspeed, recruitment and employment law specialist, on 01273 236 236 or email to

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