This Content Was Last Updated on April 21, 2020 by Jessica Garbett


As many people will know its proposed the Public Sector “reverse” IR35 rules be rolled out to the Private Sector from April 2020.

Last week the draft legislation was published, and we are sharing with you a commentary on this by Markel Tax (formerly Abbey Tax) who underwrite our Professional Fee Protection Scheme.

Theres a lot of time for things to change – a new Prime Minister, presumably a new Chancellor, Brexit, a General Election?  However this is where we are at present:

The new draft IR35 legislation has been released today, here is a summary of the key points and our initial thoughts on them:

  • Small end-clients outside of scope
  • New Status determination Statement
  • New Client led disagreement process

The draft legislation amends the existing public sector legislation in respect of IR35. The new provisions will apply to public sector bodies  as well as medium or large businesses in both the private and third sectors.


For PSCs in the private sector, where the end-client business is a small company as defined by the Companies Act, the new legislation will not apply, meaning it will be IR35 business as usual.  Section 382(3) of companies Act 2006 currently provides:


The qualifying conditions are met by a company in a year in which it satisfies two or more of the following requirements:


Turnover of no more than £10.2 million
Balance sheet total of no more than £5.1 million
Number of employees of no more than 50


Also be aware that HMRC have included provisions for anti-avoidance by ensuring that subsidiaries cannot qualify as small company if they’re part of a group.


For supply chains in the private sector where the end-client business does not meet the small companies definition, the legislation will apply.  This is the same legislation that’s already in place for the public sector, but with two interesting amendments:


1. Status Determination Statement.  The end-client business must provide a statement confirming it has concluded whether or not IR35 applies to that specific engagement.  This statement must be provided to the PSC worker and the party who directly engages the PSC.  Until this has been provided, the end-client business will stand in the position of “fee-payer” (meaning they’re responsible for ensuring the correct tax and NI treatment) with all the potential liabilities to tax and NI.


2. Client-led disagreement process.  The legislation has introduced a mechanism for PSCs to appeal against an end-client decision.  The legislation imposes that if a worker or PSC provides representations that it disagrees with the status determination,  the end client has 45 days to respond, along with its reasoning, and confirm either its original decision was correct or provide a new status determination statement.  If the client fails to do this then,  again, they will stand as “fee-payer”.  It is not clear if a PSC would already be paid in advance of such an appeal, or whether entering such an appeal is accepting that the PSC will not be paid until the matter is resolved.  Moreover, there doesn’t seem to be any teeth within the legislation to suggest that an engager might actually overturn their original decision.