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Markel Tax

23 May 2018

IR35 consultation

On Friday 18 May, the government released its long-awaited consultation on off-payroll workers in the private sector. The consultation looks at proposals to tackle IR35 in the private sector (following on from the public sector roll-out last year).

Before examining the possibilities of reform, the consultation acknowledges that the outcome of the self-employed consultation will directly impact IR35 (in that the rules for determining whether IR35 applies may change) it goes on to examine the aftermath of the public sector changes which the government concludes was a success.

As expected the analysis of the current compliance of IR35 in the private sector highlights issues such as the length of time taken for HMRC to resolve enquiries and the problems of recovering monies from PSCs (as often they don’t have the funds to pay). It also highlights an apparent perception of PSCs that there is a low risk of HMRC opening an enquiry and the PSC being liable. These factors have led to “endemic non-compliance for off-payroll engagements in the private sector”.

It comes as no surprise that first on the list of possible reforms is 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.

An alternate option discussed is that rather than placing the determination of IR35 with the end client, end clients are “encouraged” or “required” to establish 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.

A third option within the consultation would see 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.

Whilst the consultation itself does give passing reference to the fact that it is reluctant to place onerous additional admin burdens on end client organisations, the three main options for increased compliance do exactly that.

The consultation closes on 8 August 2018 and can be found here.

Markel Tax will be replying to the consultation and we will publish our response to all our clients.

If any of you would like to share any views for us to consider with our response or have any current IR35 issues you would like to discuss, please contact us at
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