The Association of Chartered Certified Accountants (ACCA) has warned that a change in UK tax legislation could lead to added confusion over employment status, in a move which could also harm the contract employment market.
It comes as Her Majesty's Revenue and Customs (HMRC) is publically consulting on setting new off-payroll rules, previously known as IR35. HMRC proposes shifting responsibility for setting tax status from contractors to medium and large private sector companies.
ACCA’s policy manager – Europe, Lilly Aaron, has urged there be a delayed introduction of the legislation until 2021, to allow a full appraisal of the proposed rules and consider the best way forward.
She said: “ACCA will always support anti-avoidance measures and work with government to make sure business is clear about paying the tax it owes.
“On the surface this legislation aims to tackle contrived working practices that may disguise the true nature of the relationship between a worker and client. In practice however, this reform could create a complex web of new rules and liabilities throughout supply chains causing confusion over employment status and where tax liabilities rest.
“Two years on from implementation there is a lot of lessons to be learned from these rules being introduced to the public sector. While the public sector faces having its current rules adjusted, it is essential that we get this right the first time for the private sector to give businesses some certainty. Now more than ever it is important to conduct thorough impact assessments, at a time when many organisations have diverted resources away from further recruitment and business growth to focus on Brexit contingency planning.”
In its consultation response, ACCA has advised that the proposed legislation threatens to place large administrative, compliance and resourcing burdens on the contract employment market, with off-payroll workers potentially increasing contract pricing and impacting the viability of some projects.
In drafting its response, ACCA surveyed members who both hire and act as off-payroll workers to find out how they would change their practices with the new rules. Notably 96% of contractors said they may have to respond by increasing their fees and those engaging them said there would be a ‘reduction in flexibility for the client’ wanting to invest in short-term projects.
ACCA also went on to call for a robust, independent appeals process to give both workers and agencies greater certainty over their tax status. Many of the workers potentially affected form the bedrock of financial, business management, technological and cyber security advice in the UK.