22nd May 2018

HM Revenue and Customs (HMRC) has launched an open consultation as it seeks the best route to combat non-compliance with the off-payroll working rules (IR35) in the private sector.

IR35 was introduced by the government in 2000 to ensure that individuals working through a personal service company, who would have been employees if they had been engaged directly, pay roughly the same amount of Income Tax and National Insurance Contributions (NICs) as they would do if they were employed. HMRC research suggests that as little as one in ten of the relevant individuals are applying the rule in the correct fashion, costing the Exchequer hundreds of millions of pounds in the process.

The government reformed the rules for IR35 within the public sector, with early indications suggesting it has resulted in an increase in compliance. As a result, Chancellor Philip Hammond announced that they would now consult on the best way to tackle non-compliance in the private sector. You can access the consultation here.

The open consultation closes at 11:45pm on Friday August 10th, 2018.

UNW’s Employment Taxes and Payroll Partner, Lee Muter commented: “It is not unexpected that the Government is looking to extend the scope of operating IR35 from the Public Sector to those employers in the Private Sector, the only uncertainty is in which tax year they will look to implement the rules. The proposed changes will mean that all employers will need to decide whether individuals providing services through an intermediary (usually a one-director Limited company) would have been an employee but for that intermediary and potentially make payments through the payroll.”

I would strongly recommend that employers start the process now of identifying any individuals they currently engage through an intermediary to determine the extent of the issue, and then devise a strategy to deal with the proposed changes”

For more information regarding UNW’s Employment Taxes and Payroll services, please visit our employment taxes page or you can contact Lee Muter at leemuter@unw.co.uk or on 0191 243 6089. 

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