IR35 was introduced to ensure that people who work like employees, regardless of the structure they work through, pay roughly the same employment taxes as employees. IR35 applies where an individual (worker) provides a service through an intermediary (i.e PSC) to another personal or entity (client).
In April 2017, reforms were rolled out to the public sector to tackle non-compliance. These reforms led to the public authority making the determination on whether the worker was caught by the IR35 rules. If the off-payroll rules applied then the public authority or fee payer (i.e. agency) that paid the PSC became responsible for deducting and paying the PAYE/NI across to HMRC. Before these reforms, the decision on whether the IR35 legislation applied to each individual contract was made by the worker. You can recap the previous changes here.
HMRC estimate that the cost of non-compliance in the private sector is growing to £1.3bn a year by 2023/24. With PAYE receipts increasing and independent research commissioned by HMRC suggesting that the reforms have been successful in increasing compliance in the public sector, they've decided to roll out these changes to the private sector with some proposed tweaks.
In response to concerns raised about the capacity of particularly smaller organisations to cope with these reforms, HMRC has decided that small businesses who fit the Companies Act 2006 definition will not be affected by the reforms – and therefore not need to determine the status of
Instead, the current rules will stand
The communication and reasons behind the determination of IR35 status for the worker was highlighted
To make sure all parties comply with their responsibilities where HMRC do not receive the PAYE/NI, the liability will rest with the party who has failed to fulfil their obligations – and this will revert back up to the first party/agency in the chain.
Concerns were raised around the lack of a process to challenge the determination. One suggestion
A client led disagreement process should be created to help workers challenge the determination i
HMRC created a Check Employment Status for Tax (CEST) service to help people decide the status of workers and whether the off
HMRC will produce an education and support package to help
It’s important to remember that the core rules
The results of the consultation will inform the draft Finance Bill legislation, expected to be published in Summer 2019, with the rule changes
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