COMPLIANCE
The changing landscape of off payroll working in the public sector Sudeep Ganguli, employment taxes senior manager at PSTAX discusses the importance of keeping up to date with the latest developments in the off payroll working sphere, and and provides information on all the latest updates P ayroll professionals already have a huge amount on their plates in terms of tax / National Insurance contributions (NICs) and payroll
organisations had to implement them when the rules were initially introduced back in 2017. The whole area of OPW has been subject to recent scrutiny by both the National Audit
employment status for tax (CEST) tool was only available in March 2017, but had to go through substantial changes as it didn’t originally work correctly, and clients had difficulties using it ● the 2020/21 financial statements of government departments and agencies include a total of £263 million paid, owed, or expected to be owed for failing to administer OPW reforms correctly. In all cases, HMRC found the public body hadn’t taken reasonable care to prevent errors, including when answering questions used in the CEST tool. The NAO report included the following recommendations for HMRC: ● further development and simplification of the CEST tool and the usefulness of CEST for different sectors should be carefully considered ● identification and setting out examples of good implementation ● updating its estimates of compliance costs based on real practical experience ● development of more efficient and effective systems to ensure it correctly collects total taxes due where errors have been made. In February 2022, the House of Lords Economic Affairs’ Finance Bill Sub- Committee wrote to the government, listing its main findings and conclusions on OPW, after holding follow-up evidence sessions in December 2021. The key recommendations were as follows: ● the government’s extension of OPW rules to the private sector in April 2021 appear to have resulted in an increased use of umbrella companies (companies
and pensions legislation, rules and guidance. In addition, responsibility for off payroll working (OPW) is increasingly being pushed towards payroll professionals, possibly because it’s so complex, or perhaps because human resource or finance colleagues don’t want to deal with this hot potato! It may be of little comfort to readers to hear about the changing landscape in terms of this major compliance issue, but it’s necessary to be kept abreast of the most recent developments. These include: ● various reports, which are constructively critical of the implementation and tools available to deal with OPW following the rule changes in 2017 ● evolving case law, which demonstrates how difficult it is to make status decisions ● the recent formation of a new, dedicated OPW compliance team at Her Majesty’s Revenue and Customs (HMRC) ● confirmation of the punitive consequences for end clients where mistakes have been made. Recent reports As readers may be aware, the whole area of OPW has been subject to recent scrutiny by both the National Audit Office (NAO) and the House of Lords Finance Bill Sub-Committee. The conclusions by the NAO and the Sub-Committee included similar themes regarding the complexity of the rules and the time public sector
Office and the House of Lords Finance Bill Sub-Committee
The key findings of the NAO report, issued in February 2022, highlighted the following: ● there was an increase in overall tax revenues because of these reforms, with more workers being deemed as employed for tax purposes ● the rules lacked a clear legal route to appeal status determinations which were deemed unfair ● the rules result in the full burden of the tax / NIC liability falling on the end client where mistakes are made ● HMRC significantly underestimated the costs to organisations in implementing the OPW rules. This was in terms of general compliance and higher costs involved in engaging contractors, because of the difficulties in attracting them to provide services following the rule changes ● the first version of the check
| Professional in Payroll, Pensions and Reward | September 2022 | Issue 83 18
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