UK government launches review of plans to extend off-payroll rules to private sector
The reforms were announced in the 2018 Budget, and are designed to tackle non-compliance with off-payroll working rules. Contractors who use personal service companies to work for large companies currently make their own arrangements for paying income tax and national insurance contributions (NICs), which HMRC believes can lead to them paying significantly less income tax and NICs than an equivalent employee.
HMRC has already given public sector organisations the responsibility of deciding whether such arrangements are legal, which means bearing the risk of being found liable for unpaid tax if they are later found not to be legal. From April 2020, medium and large organisations in the private and charitable sectors will have to make the same decision.
The review will focus on the implementation of these reforms, the speed of which has attracted criticism from employers, contractors and professional advisors. Most criticisms relate to the difficulty in determining whether a worker should be treated as an employee or an off-payroll contractor, and the concern that private sector end clients will take an overly conservative approach to the question and deem many contractors to be salaried employees.
HM Treasury says that the purpose of the review is 'to address any concerns from businesses and affected individuals about how the rule changes will be implemented...The review will determine if any further steps can be taken to ensure the smooth and successful implementation of the reforms, which are due to come into force in April 2020.'
'It looks like the April 2020 off-payroll working changes will go ahead but the Government is clearly keen to ensure that implementation is as smooth as possible…[although] detailed guidance has yet to be published by HMRC, less than three months before the implementation date', commented Colin Ben-Nathan of the Chartered Institute of Taxation.
The review itself will consist mainly of a series of roundtables with interested parties. It will end by mid-February in time for the 6 April 2020 implementation date.
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