Updated HMRC guidance published on IR35

HM Revenue & Customs (HMRC) has published updated guidance on IR35, following important changes which took effect at the beginning of April this year.

The guidance, which comes several months after the controversial reforms were first phased in, sets out to answer what HMRC believes are likely to be the most frequently asked questions about the new regime – which essentially sees that organisations operating in the public sector are now responsible for determining the IR35 status of any contractors working for them.

As per HMRC’s new guidance, however, these rules only apply to ‘public authorities’, which it says can be defined as:

  • Government departments and any associated executive agencies.
  • Most companies that are either owned or controlled by the public sector.
  • Schools and Universities.
  • Local authorities.
  • The NHS.

Commentators have welcomed HMRC’s confirmation of what constitutes a ‘public authority’, as previously many thought that any organisation receiving funding from a public sector source would need to abide by the new IR35 regime.

However, the updated guidance appears to present a last-minute U-turn in relation to private sector retail businesses that serve the NHS, such as GP surgeries and dental practices.

Previous correspondence had suggested that such businesses would be excluded from the new IR35 rules, but HMRC’s updated guidance now suggests the opposite.

It reads: “Hospitals, GP surgeries and dental practices that provide NHS medical and dental services will need to consider whether the off-payroll working in the public sector rules apply to all contractors working for them through an intermediary.”

However, it adds: “High street pharmacies or opticians, will not need to check if the off-payroll working rules apply.”

The document also sheds some light on exactly what affected public authorities and end-users will need to do in order to be compliant with the new rules.

HMRC’s full updated guidance can be accessed here.