Responding to the Government’s announcement today (7 January) of a review of the proposed April 2020 changes to off-payroll working to address concerns from businesses and contractors about how they will be implemented, Colin Ben-Nathan, Chair of CIOT’s Employment Taxes Sub-committee, said:
“It looks like the April 2020 off-payroll working changes will go ahead but the Government is clearly keen to ensure that implementation is as smooth as possible. This review is to be a speedy one, concluding in mid-February, and certainly with the legislation yet to be finalised and detailed guidance published time is very much of the essence. The Government has also said it intends to take a further look at the Check Employment Status for Tax (CEST) tool which is interesting as an updated version was released in November.”
Further support for engagers, agencies and workers/intermediaries is needed, says the CIOT. For example, detailed guidance has yet to be published by HMRC, less than three months before the implementation date. Many organisations have had to make decisions on contracts and projects that will start after or extend beyond 6 April 2020 without knowing what the final legislation will be and without seeing HMRC’s guidance. Clearly the General Election meant a delay but it does mean that things are significantly less advanced than they should be and the concern is that the review may delay things further, warns the CIOT.
This said, a number of easements and clarifications could be made to smooth implementation. For example, a light touch on penalties where engagers and agencies have done their best to comply but where for whatever reason they have fallen short.
Particular aspects to the off-payroll working rules that the CIOT would like to see clarified include:
Identifying more clearly when an engager has out-sourced a service to another business, as opposed to being provided with labour by that business to do the work itself (in the former case IR35 does not apply to the outsourcing, albeit that it may apply further down the supply chain).
Identifying whether an engager is ‘small’ and, if so, how a third party agency (or the worker/their intermediary) will know that the engager is small. The new rules do not apply to private sector engagers that are ‘small’ but there is no obligation for a business to notify contractors of this.
What happens if an engager wrongly deducts PAYE/NICs from payments to an intermediary (i.e. they get their status wrong)? There needs to be an efficient procedure for refunding taxes overpaid by the engager.
Conversely, where an engager fails to deduct PAYE/NICs where it should have done, there needs to be a process to offset taxes paid by the intermediary or the worker on the same income.
International aspects need to be clarified, i.e. where the engager, agency, intermediary or worker is located or works abroad.
Colin Ben-Nathan added:
“The key thing now is for the review to be completed as soon as possible, for appropriate easements to be made wherever possible and for the final legislation and guidance to be issued swiftly. The off-payroll working changes require businesses and agencies to make significant changes to their systems and processes and 6 April is now approaching very fast.”
Notes for editors
1. The off-payroll working rules were introduced in 2000 and require that individuals who work like employees, but through an intermediary (typically their own company), pay similar taxes to other employees. However, the Government have been concerned for some time that the rules are not being properly applied. Since 2017 public sector organisations have been responsible for assessing the IR35 employment status of contractors and, where the rules apply, this involves deduction of PAYE/NICs at source. The changes due to be introduced in April 2020 will require medium and large organisations in all other sectors to do the same.
2. The Chartered Institute of Taxation
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.
Contact: Hamant Verma, External Relations Officer, 0207 340 2702 HVerma@ciot.org.uk
Out of hours contact: George Crozier, 07740 477 374)
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