TT318: Off-payroll reforms into review
Following months of disquiet, the government announced a review of the extension of the off-payroll taxation rules into the private sector.
The rules, also known as IR35, are intended to tighten non-compliance with off-payroll working regulations by shifting responsibility for determining the tax status of contractors from the workers to the end users – in this case, private sector medium and large organisations and charities.
Uncertainty around the rules has been compounded by several Tax Tribunal cases both won and lost by HMRC. Groups representing those working through personal service companies have lobbied the government that the implementation of the extension poses serious financial risks to those affected.
One key contentious issue is HMRC’s online employment status test tool. The CEST tool (check employment status for tax) has been widely criticised as lacking nuance and being skewed towards employment status rather than self-employed. In 15% of cases, the tool was unable to provide a determination. In December, HMRC released an update to the tool, including a raft of new and updated questions, with feedback invited from over 300 stakeholders.
On 7 February 2020 HMRC announced that the rules will now apply only to payments made for services provided on or after 6 April 2020. Previously, the rules would have applied to any payments made on or after 6 April 2020, regardless of when the services were carried out.
The government review is due to conclude in February 2020, following meetings with stakeholder groups of contractors and businesses. While it’s unlikely that the roll-out will be cancelled, the review is tasked with investigating the impact of the changes across different types of contractors and those who will have to implement employment determinations, with a view “to ensure the smooth and successful implementation of the reforms”. Analysis of the impact of the initial roll-out to the public sector will be included, as well an evaluation of the revised CEST tool.
With only weeks before the new tax year, there is significant uncertainty for those affected by the off-payroll reforms. If you have any questions about your status or would like us to carry out a review of the status of your contactors, please speak with your Barnes Roffe contact partner.
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