No movement on off-payroll reforms
In spite of pressure from the contractor community there have been no further announcements to change the scope or timing of the off-payroll reforms
The off-payroll reforms (IR35) were not mentioned by the Chancellor in the Budget Speech, mainly because there was nothing to say.
According to the para. 2.178 in the Red Book, despite the recent review by the government: “The government believes it is right to address the fundamental unfairness of the non-compliance with the existing rules, and the reform will therefore be legislated in Finance Bill 2020 and implemented on 6 April 2020, as previously announced.”
The government did make a number of last minute changes as a result of the review “…to support its smooth and successful implementation.”
The House of Lord’s Finance Bill sub-committee was also carrying out a review of the off-payroll reforms. That sub-committee has been hearing oral evidence and written evidence could also be submitted.
The House of Lords review has concluded but, the sub-committee has yet to publish its findings. Although, it would appear, that the government has little interest in the outcome.
Moving forward, it is important to get to grips with the guidance that HMRC has released on CEST and also the guidance on Off-payroll working legislation: Chapter 10, ITEPA 2003 (from 6 April 2020). Although, it must be remembered that this guidance is still in draft and subject to change.
Under the draft legislation, there is a duty on the client to take ‘reasonable care’ when determining whether the contractor should be inside or outside of IR35. HMRC have provided a list of what they believe is taking reasonable care and what they believe as not taking reasonable care.
According to HMRC, examples of behaviours that would indicate a client has taken reasonable care include, but are not limited to:
- Accurately applying and keeping a record of the employment status principles.
- Accurately completing HMRC’s Check Employment Status for Tax (CEST) tool.
- Applying HMRC guidance on determining status.
- Seeking the advice of a qualified, professional advisor.
- Having someone with a good understanding of the work to be undertaken involved in the determination process.
- Checking existing individual determinations to ensure they remain valid / accurate.
- Reviewing the processes being applied and amending for future determinations where necessary.
- If there are any material changes to a worker’s terms and conditions, or working practices, making a new status determination.
- Ensuring they check and review processes of other parties where they subcontract the determination process to another party. The client remains responsible for the accuracy of the SDS even if it subcontracts that responsibility to another party.
Not reasonable care
According to HMRC, examples of behaviours which do not constitute reasonable care include, but are not limited to:
- Determining that every worker who provides their services through an intermediary is caught by the off-payroll working rules without giving any consideration to the specific facts of each individual case.
- Determining that the off-payroll working rules apply to a large group of workers who have some variations between the work that is being carried out, without giving proper consideration to the different working arrangements for each worker.
- Failing to reconsider determinations where there has been a material change in circumstances.
- An absence of any proper support or training within the organisation to enable those individuals responsible for making determinations to properly consider the off-payroll working rules.
- Inputting inaccurate information into CEST.
- Failing to take into account all relevant evidence.
- The person tasked with completing the SDS does not possess the knowledge required to complete it and is not provided with the required level of support.
- The client subcontracts the SDS process to another party and does not confirm the accuracy of that conclusion and the reasons for it.
If the client has taken reasonable care and fulfilled its other duties, the duty to deduct tax and pay it to HMRC will not rest with it. Be aware though that this is the case even if the client got the decision wrong.
IR35 omission is 'insulting'
The lack of mention of IR35 reforms in the Budget stirred outrage from FCSA chief executive Julia Kermode, who called the omission “insulting”.
“I am shocked that he made absolutely no mention of IR35 or the off-payroll reforms in his budget speech, except perhaps veiled in his comment with regards to dealings with tax avoidance and compliance when introducing his public sector spending plans.
“As expected, the Budget 2020 Red Book confirms that the off-payroll legislation will come into effect this coming April in arrogant disregard for all the many sensibly argued submissions made to the government, like it or not.”
However, Tom Evennett, EY’s head of private services, saw a glimmer of hope in the lack of information.
“There may be some limited good news in the Budget documents, as the commits to ‘making a number of changes to support its smooth and successful implementation,’ but it is unclear how significant these changes will be and the main thrust of the rules will be legislated in Finance Bill 2020 and implemented on 6 April 2020, as previously announced."
You might also be interested in
Rebecca is a leading expert in ‘employment status’ including IR35, off-payroll working and the law involving independent contractors and the self-employed for the purposes of tax and employment law. Rebecca has run her own consultancy for the past 20 years covering all employment status issues such as off-payroll in the private and public...