The Treasury
confirmed in this week’s Budget that it will legislate to implement the changes
to the off-payroll working rules (IR35) from 6 April 2020. The rule change aims
to catch out contractors who set up limited companies to minimise tax exposure
while working in similar conditions to that of an employee.
DWF corporate
tax partner Caroline Colliston said the implementation would ‘occur against a
backdrop of concerns… about the impact on business, the labour supply chain and
the confusion and lack of clarity around the terms and operation of the
legislation’.
She suggested
employers ‘take quick action’ to ensure compliance, including ‘identifying
their contingent workforce, ensuring the burden of operating PAYE is shifted
down their contractual labour supply chain, reviewing the terms of contracts in
their labour supply chain, adopting robust internal procedures and audits to
ensure status determination statements are provided and liability is limited as
well as considering establishing an employment status disagreement process’.
Seb Maley, CEO
of IR35 compliance specialist Qdos, called the move to continue with the 6
April start date for IR35 a ‘needless, short-sighted tax grab’.
Miles Dean, head of international tax at Andersen Tax UK, said: ‘Contractors are an easy target. The sector has been rife with tax avoidance for many years and this, unfortunately, is the result. Are large corporates, who may have well over 1000 contractors at a time, really supposed to undertake an individual review of each one's affairs and then certify whether or not they’re employees or consultants?
‘Putting the
burden of determining status on the third party company is onerous, impractical
and unfair to say the least, irrespective of the current coronavirus outbreak.
The fact that businesses are at risk from both HMRC and the contractor if it
wrongly determines the status of an individual is a very unfortunate feature of
the legislation.
‘A form of
self-certification from the contractor would be much more equitable,
particularly in circumstances where the determination between employee and
self-employed is borderline. Which it very often is.’
