The government has announced a review of the roll-out of its off-payroll working rules, but industry specialists have expressed concern that the analysis will not result in any meaningful change.
A review of changes to off-payroll (IR35) working rules was announced in a statement yesterday and has been commissioned to “address any concerns from businesses and affected individuals about how they will be implemented”.
The statement indicated that the review will conclude by mid-February, and will focus on determining if “any further steps can be taken to ensure the successful implementation of the reforms” and if any additional support is needed to ensure that the self-employed, who are not in scope of the rules, are not impacted.
IR35 was originally introduced from April 2000 to tackle the issue of individuals paying less tax and NI by working through personal service companies (PSCs) or other intermediaries. There have been many tweaks to the IR35 rules over the years, and in 2017 they were redrafted for public sector contracts and rebadged as “off-payroll working”. The latest reforms to the off-payroll working legislation are due to be rolled out in the private sector from 6 April 2020.
If the rules are implemented as proposed in the draft legislation, then responsibility for determining whether an engagement falls within the rules will move from the worker’s PSC to the business requiring the services – provided the organisation is defined as ‘medium’ or ‘large’. The party which pays the PSC will then be required to operate PAYE and NICs.
Similar reforms to the public sector in 2017 were criticised as being rushed and leading to blanket decisions from public bodies to put workers on the payroll.
Under the current timetable, there are now less than three months for businesses and their advisers to get ready for the change. Professional bodies and sector specialists have consistently called for a delay in the delivery of the rules due to the complexity of the legislation and the current lack of specific guidance to accompany it.
Alongside the main review, the government will also carry out further analysis of its controversial check employment status for tax (CEST) tool, taking into account public sector bodies’ experience of implementing the reform to the off-payroll working rules in 2017. One example they may take into consideration is the recent note on the NHS Digital accounts stating that the organisation faces a tax liability claim in excess of £4m for the misuse of the CEST tool.
Not enough time to consider complex issues
News of the review has been greeted with a mixed response from professional bodies and sector experts.
Jon Stride from the Association of Taxation Technicians welcomed the announcement, but questioned how comprehensive the review will be given its limited timescale and reiterated the body’s call for a 12-month delay to the introduction of the new rules.
“Without a delay, we fear seeing low levels of compliance and increased numbers of errors and greater demand on HMRC telephone lines and staff for support at a time when their resources are already strained,” said Stride. “We may also see risk-averse positions being taken by businesses, for example, a blanket decision to put all workers onto the payroll regardless of the nature of the arrangements, to the detriment of workers.”
Julia Kermode, chief executive of freelance association the FCSA, labelled it as “another meaningless review” from a government “intent on bulldozing ahead with its plans anyway.”
“They are expecting the review to be completed by mid-February which is simply not long enough to consider the deeply complex range of issues that the off-payroll legislation is throwing up,” continued Kermode.
“HMRC has stated that it will be continuing its preparations to roll out the reforms in April come what may. We have also learned today that the review will focus on the implementation of the reforms rather than the reforms themselves.”
Brian Palmer, tax policy expert for AAT (Association of Accounting Technicians) commented that given the problems faced over IR35 in the public sector, the message from his organisation remains not to rush this in.
“Given all that has happened on the Brexit front during the last twelve months, it is a more than a little disappointing that the government has not taken the opportunity to press pause on the introduction of IR35 to the private sector.
“However, it doesn’t come as a complete shock that the projected £3bn boost to the public purse in extra tax revenue over a four year period has proved too big a temptation to the government, who seem determined to carry on regardless.”