The House of Lords Finance Bill sub-committee has launched a new call for evidence into the implementation of the off-payroll rules in the private sector and how they are working in practice.

This short follow up enquiry follows the committee’s April 2020 review and report ‘Off-Payroll Working: treating people fairly’, which considered proposals to move responsibility for assessing compliance within the Off-Payroll Working rules from contractors to those who engage them. The review concluded that the rules are flawed and the government should re-think tax and employment status but it was cut short due to the pandemic as well which also led to a twelve-month delay in introducing the rules to the private sector.

The sub-committee is now interested in hearing about the experiences of those businesses where contractors are ultimately working for the engagers and the contractors themselves, with regards to how the rules have been working in practice since their introduction in April 2021.

They are seeking views on the following:

1. Has the recent extension of the Off-Payroll Working rules to the private sector made it more difficult for engagers to hire people with the right skills and expertise? To what extent has its introduction contributed to job vacancies?
2. For those engagers (and their advisers) who use the CEST (Check Employment for Tax Status) tool to assess employment status, how effective do you consider it to be? Do you have confidence in its results? If not, what further improvements need to be made to it?
3. What changes have engagers had to make to apply the off-payroll rules to contractors, in terms of systems, personnel and training? By reference to your own experience, to what extent (if any) do you consider that compliance costs have increased because of the changes?
4. How well has HMRC supported engagers, contractors, and their advisers with the implementation of the new rules and is any further or different type of assistance needed?
5. To what extent has the introduction of the new rules generated disputes between engagers and contractors concerning the status of contractors vis à vis the rules and how successfully or otherwise have these been resolved?
6. What behavioural effects have resulted from the introduction of the new rules in the private sector in terms of the arrangements adopted in hiring contractors?
7. The Government is proposing a new employment body with powers to enforce employment rights, including for those engaged by agencies and umbrella companies. How effective do you think such a body will be in ensuring workers, particularly the lower paid, are treated fairly?
8. How successful will the draft Finance Bill proposals for earlier publication of information about promoters and avoidance schemes be in protecting individuals from being drawn into such schemes?

Written responses are requested by Monday 15 November 2021 and should be made online here. Submissions should be short, concise and of no more than six pages and respondents will be contacted to confirm whether their submission has been accepted as evidence.

Useful guides on this topic

Personal Service Companies (PSC) tax
A Personal Service Company (PSC) derives its income from the activities of one individual. It is also a close company for tax purposes.

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
The Off-Payroll Working rules only apply in cases where, if you worked directly for the end client you would be deemed to be its employee in terms of the employment status tests.

Employment status & detailed checklist
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'.

External link

Call for evidence