Government launches off-payroll review

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.

8th Jan 2020
Journalist
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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."

Replies (6)

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By ireallyshouldknowthisbut
09th Jan 2020 09:24

Bit late in the day given the rules bite essentially from 1st Feb, assuming an end of month bill and 30-40 day payment terms.

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By wilcoskip
09th Jan 2020 11:21

Also a bit late given that many employers have already kicked their subbies out of companies and made firm arrangements for the new scheme.

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Mohit Baheti
By camohitbaheti
09th Jan 2020 13:38

Also, the review is more about how the rules shall be implemented rather than considering their overall need/existence. We shall not be very hopeful for a positive outcome unfortunately.

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By raycad
09th Jan 2020 14:59

My money is on this being a pre-cursor to a 12 month implementation delay. There's no other explanation, given the very short timescale and the fact that the new CEST tool was only wheeled last month. HMRC have form in this sort of thing. Off the top of my head I can recall the "new" CIS scheme, the SRT rules and MTD, for all of which the roll-out was delayed by at least 12 months.

The reason is invariably because HMRC "over-promise" delivery timetables to their Treasury masters, only for it to dawn on them very late in the day that they are simply not ready. And they will then claim that the delay is because their "customers" are ill-prepared and need more time.

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By GR
09th Jan 2020 19:09

raycad wrote:

My money is on this being a pre-cursor to a 12 month implementation delay. There's no other explanation, given the very short timescale and the fact that the new CEST tool was only wheeled last month. HMRC have form in this sort of thing. Off the top of my head I can recall the "new" CIS scheme, the SRT rules and MTD, for all of which the roll-out was delayed by at least 12 months.

The reason is invariably because HMRC "over-promise" delivery timetables to their Treasury masters, only for it to dawn on them very late in the day that they are simply not ready. And they will then claim that the delay is because their "customers" are ill-prepared and need more time.

I think the government are only going to look at how to have a smooth implementation of the reform. I believe this reform was suppose to come into the private sector on 6 April 2019 but then got delayed. My money is firmly on this reform going through on 6 April 2020. It has already been operating for nearly 3 years in the public sector.

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By GR
09th Jan 2020 19:19

I don't understand how the big contractor accountancy firms such as Clearsky, SJD, Brooksons, JSA, Nixon Williams, Crunch, etc are going to cope with this new reform? Sure their umbrella operations may get bigger but what about their accountants in the accountancy side. Surely a few redundancies ahead? I am assuming their accountants must currently be leaving these firm in big numbers. The next Thomas Cook or Toys R Us could be a contractor accountants? However I believe John Stokdyk wrote a good article on how crunch is currently adapting so maybe they will be OK?

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