IR 35: The Government Consultation

A few days ago, the government released its long-awaited IR35 consultation on off-payroll workers in the private sector. The consultation talks of the aftermath of the recent public sector changes [resulting in a large number of cases of end clients making tax deductions before paying Personal Service Companies (PSC’s)] which the government concludes were a success.   The document analyses the current compliance of IR35 in the private sector and highlights factors which have led to “endemic non-compliance for off-payroll engagements in the private sector”.  These factors include:

  • The length of time taken for HMRC to resolve enquiries
  • The problems of recovering monies from PSCs (as often they don’t have the funds to pay)
  • An apparent perception of PSCs that there is a low risk of HMRC opening an enquiry and the PSC being liable.

The Options

Three options are offered as potential solutions:

1. Pushing forward the public sector changes in to the private sector. This would see responsibility for the decision, as to whether IR35, applies placed with the end client company and the responsibility of paying the correct tax and National Insurance with the agency paying the PSC for its services

2. Rather than placing the determination of IR35 with the end client, end clients are “encouraged” or “required” to establish that the service provisions in the supply chain are compliant. This option sees the end client seeking surety from agencies and ultimately PSCs that they are complying with IR35. The consultation considers that perhaps the end client could require all PSCs to provide a completed HMRC CEST confirmation.

3. End clients keeping clear records of contracts, provision of services, shift patterns, methods etc of all off-payroll contractors. This additional admin burden, would help to ease HMRC enquiry timescales as it would provide the necessary information needed by HMRC in the event of an enquiry into IR35.

The consultation document indicates that government is reluctant to place onerous additional admin burdens on end client organisations, but the three main options for increased compliance appear to do exactly that.

Duration and Closing Date

The consultation closes on 8 August 2018.

Lotuswise Chartered Accountants and Business Consultants can help you and your business make sense out of IR35 rules, and whether or not they impact on your working arrangements. To find out how, please contact usTo also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.

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