The government has announced a consultation on off-payroll working rules, commonly called IR35, as part of its tax admin day announcements. The rules were introduced for clients in the public sector in 2017 and extended to include medium and large-sized clients in the private and voluntary sectors in 2021.
The proposed solution would introduce new legislation to share the Income Tax and NICs liability between the client and the worker, by estimating a set-off for tax and NICs already paid by the worker and their intermediary.
This would potentially work in a similar manner to existing provisions in the PAYE Regulations 2003 (SI 2003/2682), that can allow the off setting of taxes already paid in certain circumstances where HMRC discovers that a directly engaged worker has been incorrectly classed as a self-employed sole trader, instead of employed, for tax purposes.
CIOT president and RSM UK employment tax partner, Susan Ball, said: “This consultation is welcome news, and long overdue, as the off-payroll working IR35 rules have been causing headaches for workers and hiring organisations for years now.
“If implemented, the new rules will not come into force until April 2024 though, and will not be applied retrospectively. This means hiring organisations may be tempted to drag their heels with any HMRC compliance checks in the meantime.
“Typically, a case can take 18-21 months to conclude, and we may see organisations procrastinating over any HMRC compliance checks in the hope that they can take advantage of the new rules when they are introduced.”