“During the inquiry, it became clear to us that there is an increasing use of personal service companies by freelancers and contractors, who are part of the UK’s flexible workforce. There are many reasons for the use of personal service companies, including the possibility of reducing tax and national insurance bills. The government’s anti-avoidance legislation, often referred to as IR35, is complex and raises its own problems. We found that there is a general lack of information of how widespread the use of personal service companies is in the UK economy and that this is due, in no small part, to the absence of reliable information collected by HMRC. This could be rectified by amending the personal tax return and employer year end declaration and making the questions on service companies compulsory, rather than optional. HMRC failed to demonstrate that that they had a sound basis for the £550m of tax and national insurance that they cited as being at risk if IR35 were to be abolished or suspended. The deterrent nature of the IR35 legislation is its main rationale. We recommend that HMRC publish a detailed assessment of this figure and we also call for an assessment to be made of the cost to the taxpayers affected by the rules. Whilst we commend HMRC on the establishment of the IR35 Forum as a means of greater stakeholder engagement, we believe that HMRC should consult on revising the ‘Business Entity Tests’ and should make the Contract Review Service more effective. We also received evidence that low-paid workers may also be employed via personal service companies and that they may not be aware that this means they have fewer employment rights. We believe that this is something which needs to be thoroughly assessed by the Low Pay Commission. We also recommend that the government produce a short guide setting out the basic differences between employment and self-employment; this would help to reduce some of the confusion experienced by those who are not in conventional employment situations. We also recommend that further measures are taken to build confidence in the public sector’s management of off-payroll engagements and that the Treasury take a leading role in this.”
The report and transcripts of evidence sessions and submitted written evidence are available on the Committee’s webpage .
The government is expected to respond to the report within two months, after which both the Committee’s report and the government’s response will be debated in the House of Lords in due course.
Offshore Employment Intermediaries
14 April 2014
Where there is a UK agency in the contractual chain, they will be responsible for operating PAYE and NIC under new rules which take effect from 6 April.
At Budget 2013 the government launched a consultation on changing the rules on Offshore Employment Intermediaries in order to deter PAYE and NIC avoidance schemes.
Following consultation to reform the rules to make enforcement easier and simpler, the government has introduced new NIC (National Insurance contribution) rules which take effect from 6 April 2014.
National Insurance regulations have been published covering:
CIPP Policy News Journal
08/04/2015, Page 300 of 521
Made with FlippingBook - Online magazine maker