In 2012, HM Treasury introduced the ‘Tax Arrangements of Public Appointees’ policy procurement notice, whereby the Treasury announced a review of the tax arrangements of public sector appointees. The key conclusions of the review were as follows:
In April 2017 the rules for contractors operating within the public sector changed again, with the responsibility for determining IR35 status shifting to the public sector end client. From April 2020 new rules are coming into place and this IR35 reform will now be extended out to medium and large end clients in the private sector.
Despite the new rules being implemented over two years ago, HM Treasury have now decided to scrap the assurance process of 2012, rules which were automatically seen by the industry as defunct at the time.
Elizabeth Truss, the Chief Secretary to the Treasury, stated, “Following a review of the rules, I have concluded that the off-payroll rules implemented in 2012 are now superseded by the IR35 reforms, and the requirement for departments to include set contractual provisions and conduct an assurance process are no longer necessary.”
From April 2020, end clients are now obliged to assess each contractor engagement to determine whether it is considered inside or outside of IR35 and provide a status determination statement. Should an engagement be considered as ‘inside’, the fee payer (usually an agency) will be required to deduct PAYE taxes and will also carry all IR35 liability.
Similarly, to the 2012 reform, HM Treasury have stated that they still expect board members and/or senior officials with significant financial responsibility within the public sector to remain on the payroll. This is unless there are exceptional circumstances and, again, such circumstances require sign off from an Accounting Officer and cannot last longer than 6 months. Contractors outside of this category are no longer required to provide the previously published ‘assurance’ and their status should be determined in line with the new IR35 reform.
The Treasury have also scrapped their annual review process of senior/board member officials but retain the right to review any such engagements to ensure businesses are taking responsibility for the assurance of their employees/contractors.
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