Lords PSC Report: No plans for clients to have responsibility for IR35

The Government has confirmed that it has no plans to make end client businesses responsible for IR35 in circumstances where such businesses engage a personal service company.

The idea of making end clients responsible has always been a looming dark cloud on the horizon of discussions about changing IR35.

For many, this would have been the worst of all worlds, as it was thought that end clients would then disengage from using freelancers.

Every time that changes to IR35 have been discussed there has always been the spectre of end clients taking over responsibility and covert warnings of 'be careful what you wish for'. Particularly after the Government put further responsibility on its own departments for determining contractors' status in the light of the 'off-payroll' rows where senior public sector workers were operating as limited companies to avoid tax and NI costs.

However, the report from the House of Lords and the Government's response seem to have laid this particular ghost to rest - for the time being.

The House of Lords report acknowledged that "businesses would generally resist being made responsible for IR35 assessment, finding the additional administrative pressure and liability as overly burdensome".

The Government has accepted this and said that it "currently has no plans to make end client businesses responsible for IR35 where such businesses engage a personal service company."

This clarification was welcomed by many representative bodies including the Interim Management Association who said: "Interim managers offer their services as genuine self-employed professionals and we fully support the need to penalise those who deliberately avoid tax and National Insurance through the use of intermediaries. We welcome the government's decision to not make the end-client responsible for determining the IR35 status of PSCs."