The Chartered Institute of Payroll Professionals
Policy Bi-Monthly Newsletter – September 2016
Working in collaboration with all stakeholders to design a robust digital tool is the way to achieve this to ensure that every possible view and experience is captured in the end product.
We are concerned however at the delivery timeline – we do not believe that a robust tool with be delivered and fully tested against all possible situations by 6 April 2017 when it will be needed.
Transfer of liability
At this point we would highlight that employers already have significant administrative burdens and liabilities, however and akin to the operation of PAYE by the employer, we agree that the liability for the correct operation should fall to the engager/agency, along with the liability for tax and National Insurance (and penalties and interest where appropriate), when the rules have not been applied correctly? However liability should transfer to the PSC and its directors where the PSC has given false information to the engager. We would highlight that this goes to the heart of HMRC's ability to police the widespread operation of IR35 and we would like to reinforce concerns that we raised in our response to the Intermediaries Legislation (IR35): discussion document : We are of the view, as a result of anecdotal and survey evidence along with observations of research findings in the Intermediaries Legislation Qualitative Research that engagers and/or employers of every size and every sector display a risk averse nature – as a result we are likely to see a greater number of individuals pay being processed via PAYE ‘just to be safe’. We therefore predict greater use of the appeal process where the PSC and/or engager disagree, this has multiple disadvantages, however the most critical for the purpose of this response is: Increased administrative cost and burden to the engager – of every size particularly the SME if the Intermediaries Legislation Qualitative Research is to be used as a benchmark. Increased administrative cost and burden to the PSC Increased costs to HMRC to process appeals. Where views have been given it is clear that there is a strong believe that additional costs of administering this obligation will be significant, both from an administrative perspective as well as the perspective of additional contract sums, which are predicted to increase to account for the impact of IR35 being operated ‘just to be safe’ by risk averse engagers. Further research, based on known workings of the digital tool along with informed decision making on additional processes required (by both engager and PSC – and agency where applicable) would be needed in order to quantify actual costs. We would ask for a delay in implementation until April 2019 - but an expansion to all engagements caught by IR35, not only in the public sector but also the private sector. This delay would provide ample time to design, build and thoroughly test the new digital tool which we believe should be mandatory to use but robust and reliable in its findings. This can only be achieved with a measured and not a rushed delivery. Taking a staggered approach to the obligation for operating IR35 assessments, first by expanding the obligation to the Public Sector and then next we would assume to the wider private and third sector will cause unnecessary complexity and does little to aid the wider understanding of IR35. There appears to be evidence that engagers of all sectors, types and sizes are ignorant of the rules regarding IR35, have inefficient processes in place to ensure compliance if burden is to be passed to them, and are therefore at equal risk of non-compliance or furthering non- compliance by PSCs. If this is the case, then transferring the burden to all engagers would provide the benefit of consistency across the board – rather than the one sector approach that is being proposed. Costs Recommendations Delay in implementation – broaden the scope
IR35 is viewed as a specialist area by the majority of payroll professionals who will need to become knowledgeable by the delivery time line.
Despite being just over six months away from a proposed go live date there is still no sign that this news and information is being promoted to the wider Public Sector engager community and their agents. This must happen as a matter of urgency to alert them of the need to adapt and strengthen their internal processes and to begin collecting the data which will enable payroll departments to process ‘deemed payments’.
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