UK and International Tax news
HMRC Issues Consultation On Off Payroll Working Rules In The Private Sector
Friday 25th May 2018
As announced in the Autumn 2017 Budget, HMRC has launched a consultation on how to tackle perceived non compliance with the off payroll working rules in the private sector.
The off payroll working rules/IR35 were introduced in 2000 and applied to those individuals who worked through personal service companies [PSCs] who would have been employees if they were directly engaged, so that they paid broadly the same employment taxes as if they were employed. The legislation required such individuals to determine whether or not they should be regarded as employed or self employed. The rules did not apply to those who were genuinely self employed.
HMRC has indicated that there is evidence that this legislation is not working effectively and non compliance is widespread. It estimates that only 10% of PSCs that should apply the legislation actually do so. In tax terms, the cost of non compliance in the private sector is high and growing and projected to increase from £700m in 2017/18 to £1.2bn by 2022/23. This cost is increasing as the number of people working through PSCs continues to grow.
In April 2017, the government addressed non compliance in the public sector by reforming the legislation for off payroll workers in that sector. Evidence suggests that the public sector reform has been effective in increasing compliance.
In the Autumn Budget 2017, the government announced that it would consult on non compliance in the private sector, having drawing on the experience of the public sector reform, including the findings from independent research on the initial stages of implementation.
The government now wishes to learn from the experience of the public sector. The latest consultation provides an early evaluation of the public sector reform and invites responses on how best to deal with non compliance in the private sector.
Responses to the consultation have been invited by 10 August 2018.
If you would like further information on the consultation, please contact Keith Rushen on 0207 486 2378.