Changes to the IR35 According to the Autumn 2018 Budget

IR35 was originally introduced to prevent tax avoidance and, specifically, to prevent individuals from working under disguised employment.

The government estimated that by 2023 there would be £1.2bn missed as a result of IR35 being applied incorrectly. Therefore, it’s no surprise that it was announced in the budget that there will be a change to the legislation aimed at decreasing this “missed” pot of money.


A similar change was already rolled out in the Public Sector in 2017 and due to the lack of information and clarity before the implementation, there was widespread havoc. The Government appear to have learnt their lesson and are planning to, firstly, carry out a consultation in order to clarify the rules and then implement them from 2020.

What we know

The entity responsible for deciding if IR35 applies or not will move to the entity making payment to the PSC. In most cases, this will be a recruitment company or consultancy.  The Chancellor confirmed that the Private Sector will see the same change but that it will only apply to ‘large and medium-sized’ companies. At present, the definition of large and medium is not certain.

Recent case law

It is somewhat surprising that the government have chosen to go ahead with this change after the recent case law that has seen the HMRC misapply IR35. What we can take from these cases is that the courts are interested in the intentions of the contractors. Factors such as autonomy, substitution clauses and mutuality of obligation would count in favour of a contract being outside IR35.


There is still much uncertainty around how IR35 is applied which is demonstrated with the successful appeals against HMRC. It is hoped that the consultation in 2019 will provide guidance and certainty for individuals when applying the legislation.