COMPLIANCE
Delayed, not diverted - off-payroll working reforms ahead
SamanthaMannMCIPPDipMAAT, CIPP policy and research technical lead , provides an update on developments and issues an invitation
I n the recent report Off-payroll working: treating people fairly (https://bit.ly/3cT7uOG), the House of Lords recommended “In the longer term the government should reassess the flawed IR35 framework, and give serious consideration to the fairer alternatives to the off-payroll working rules….”. So where does that leave us as we consider the work needed to restart, or even to begin to start, the work needed in order to comply with the off-payroll working reforms that are due to continue from April 2021? Well, the financial secretary to the Treasury, Jesse Norman MP has since confirmed the government’s intention to continue to roll out the reforms from April 2021. So, it would appear to leave us exactly where we were before, celebrating a slight delay but essentially still preparing for further reform. Background IR35 was introduced in 2000 to address a situation which resulted when individuals who might previously have been employees went on to provide their worker services through
an intermediary. An ‘intermediary’ may take many forms, but the most common occurrence is that commonly-referred to as director-owned personal services company (PSC). The result of this arrangement sees the worker paying less in taxes due to the way they choose to pay themselves, comprising a minimal salary and dividend payments. A press release numbered as ‘IR35’ introduced the requirement for the PSC to assess each contract of work to establish whether it was a ‘deemed contract’. Where that was established, the fee amounts were subject to pay as you earn (PAYE) income tax and class 1 ...appear to leave us exactly where we were before, celebrating a slight delay but essentially still preparing for further reform...
National Insurance contributions (NICs). HMRC have long-believed that compliance in this area is low, possibly due to contrivance, but equally possibly due to ignorance of this little understood requirement. Either way, the impact on Treasury in reduced tax yield is estimated to be significant. In April 2017, new reforms were introduced to the public sector that passed the obligation for assessing each contract from the PSC to the engager, so that where relevant the fee payer became liable for processing PAYE tax and class 1 NICs on the deemed payment. HM Revenue & Customs (HMRC) commissioned a modest research project shortly after introduction of these reforms which suggested they had been a success. April 2020 was to see further reforms introduced to medium and large organisations within the private and third sector. The coronavirus pandemic, however, scuppered these plans and caused government to postpone the further reforms until April 2021.
Controversy During the 2019 general election, every
| Professional in Payroll, Pensions and Reward | July/August 2020 | Issue 62 32
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