The House of Lords Finance Bill Sub-Committee has published a new call for evidence on the extension of the Off-Payroll Working rules to the private sector. The Treasury announced the review in January in the hope of ensuring smooth implementation of the rules which come into force in April 2020.
The rules were introduced in the public sector in April 2017. Since then it has been the responsibility of the public authority engager to decide whether the IR35 provisions apply to work performed by someone through a company. For the private sector, the responsibility for determining whether IR35 applies has remained with the taxpayer. This will change from April for contracts where the end-client is medium or large.
The committee is interested in how the change will work in practice and how it relates to wider changes in working arrangements. With this in mind, the call for evidence asks:
Existing measures in the public sector
1. What has been the experience of the new off-payroll rules in the public sector? What lessons have been learned from this experience and how have they affected the draft Finance Bill proposals?
Impact of new off-payroll rules on organisations
2. Has the impact of the extension of the off-payroll rules to the private sector been adequately assessed? In particular, is the assessment that has been made of the compliance burden (including costs) of these new rules realistic? Has the right balance been struck in the compliance burden on the taxpayer and on HMRC?
3. Is the exclusion of small organisations sufficiently robust and how might small organisations gain sufficient assurances that they fall within the exclusion?
4. What will be the effect of these new measures on a chain of contractors and subcontractors?
5. What scope might there be for simplifying or otherwise reducing the administrative burden of these measures? What should HMRC do to help businesses understand the new administrative rules?
Determining the tax status of workers
6. Are the tests for determining employment for the purposes of these rules sufficiently clear to both engager and worker? Do they reflect the reality of the contracting environment?
7. What is your assessment of the Check Employment Status for Tax (CEST) tool? Does it require improvement? If so, how might it be improved?
8. How effective will the status determination process be in resolving issues of employment status? Are there adequate safeguards, allowing decisions to be challenged? If not, what more is needed?
Policy objectives and the wider context
9. Are there better or simpler ways in which the objective of the new rules might be achieved? If so, what are they?
10. Will the Bill, as drafted, achieve the Government’s objectives?
11. What is your view of the role of umbrella companies in the context of these proposals?
12. How do the new measures relate to the wider context of changes in working arrangements, including the “gig economy”? Is it fair that some individuals are taxed as if they are employees, but do not have the rights of employees?
Written evidence should be submitted online here by 25 February 2020. The committee has asked that submissions are concise and no more than six pages long.
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Personal Service Companies and tax
HM Revenue & Customs (HMRC) define a service company as a company that generates the majority of its income from supplying services rather than goods to clients.
IR35: Off-Payroll Working
The IR35 tax rules apply when a worker supplies his personal services through an intermediary trading vehicle such as a company or partnership to an end client.
Off-Payroll Working: PSCs & Private Sector Engagers
This is HMRC's term for providing your personal services as an individual worker via an intermediary controlled by you, e.g. via your own Personal Service Company (PSC).
Employment status
The employment status of an individual worker depends on whether the individual is engaged by the engager under a "contract of service", or a "contract for services".
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