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HMRC guidance on IR35 reforms confirms that previous tax years will not be investigated where there is no suspicion of fraud 25 November 2019
With IR35 / off-payroll working reforms dominating so much of the news, and contractors worrying about its potential implications, guidance published by HMRC will prompt widespread relief from affected parties.
A HMRC issue briefing confirmed “HMRC has taken the decision that they will only use information resulting from these changes to open a new enquiry into earlier years if there is reason to suspect fraud or criminal behaviour”. This means that there will be no punishments or additional fees for contractors if they have genuinely misinterpreted whether they are classed as ‘inside IR35’ or not and there will be no repercussions for them in relation to previous tax years. The new legislation will simply apply to them from the beginning of the new tax year should their engager not be deemed as being small. It does signify, however, that if a contractor has knowingly falsely classified themselves as not being ‘inside IR35’ when they should have been, and so should have been processed via payroll then there may be some investigation into previous tax years and potentially consequences.
CIPP comment
The CIPP is aware of the implications that the new IR35 reforms will have, both on contractors and their end engagers. To help individuals prepare, we are offering both a webinar and a half-day training course providing information on the topic. The next webinar is running on 9 December 2019 and the next available course is being held on 11 December 2019 in Manchester.
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Update to Check Employment Status for Tax (CEST) tool section of Employment Status Manual 26 November 2019 There has been an update to the Check Employment Status for Tax (CEST) tool pages of the Employment Status manual on the Gov.UK website. Many are hoping that this could mean that the new tool will be released shortly, in line with the government’s pledge to publish an improved version prior to the end of 2019. The CEST tool is designed to assist in establishing whether a worker should be classed as employed or self-employed for tax purposes. It consists of several questions which serve to determine how a worker should be classified. HMRC says that it will stand by the outcome of the CEST tool in circumstances where it has been used correctly. There have been many requests for the CEST tool to be updated to include a question surrounding the topic of mutuality of obligation but HMRC says that a ll contracts have mutuality as otherwise no contract would exis t, and so dispute the requirement for this inclusion. It is more than likely that the revised tool will still not reference mutuality of obligation. There is great support for the introduction of a new tool, however, and many are anxious to see how it will look and what amendments will have been made. As most of our members will be aware, there will be new laws relating to IR35 / off-payroll working introduced in the private sector in April 2020. The rules are already currently in place in the public sector. A brief overview of the reforms is that for any engagers who are not deemed as being small, the responsibility for determining if a worker is classed as ‘inside IR35’ or not is moving from the contractor to the engager. If a worker is ‘inside IR35’ then the engager must process them through payroll and deduct the appropriate liabilities. The CEST tool can be used to show how an individual has arrived at a decision as to whether somebody is classed as ‘inside IR35’ or not.
The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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