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Markel Tax

19 Nov 2019

Six reasons for PSC's to be proactive to respond to the IR35 private sector changes - and not wait until April 2020 to do so!

HMRC has identified a compliance problem – they believe that only 10% of all contractors who should be treating their engagements as ‘caught by IR35’ are actually doing so. HMRC believes that number should be closer to a third of all engagements and that the planned changes to IR35 in the private sector could bring in an extra £3billion for the Exchequer.

On the face of it, from April 2020, the change removes the responsibility for IR35 status decision-making from PSCs engaged by medium and large businesses, and will make contractors vulnerable to processes created by others above them in the chain. 

But PSCs can still influence that decision. PSCs still need to look after their own interests and that should start now by having their current engagements reviewed.  For 5 very good reasons:
  1. In the short term nothing changes for PSC contractors – you are still the decision-maker and the entity which will suffer the tax liability.  If you get it wrong, HMRC won’t just want to tax you; they will want interest and will want to know how you reached that decision.  If you can’t show due diligence, then expect a penalty of at least 15% of the tax at stake. 
  2. That responsibility will even continue after April 2020 if your PSC is engaged by one of the UK’s smallest 1.5 million businesses as defined by the 2006 Companies Act.
  3. HMRC have suggested that they are keen that decisions made are forward looking and they will not immediately assume that an engagement which is caught after April 2020 was caught before.  But they haven’t categorically ruled out that they won’t look back in time. So surely it makes sense to know where you stand now.
  4. When the decision-making process changes for medium and large sized businesses, agencies and end clients and will want hard evidence – not emotional pleas – to be convinced that an engagement is ‘not caught’ by IR35. Well-reasoned evidence with a clear conclusion; a documented argument to convince the agency AND the end client to agree the ‘not caught’ opinion.
  5. If HMRC challenge the decision, it is much harder for them to win their argument if all parties have agreed the status decision, based on a clear, independent assessment. 
Markel Tax would also like to help PSCs and provide a sixth reason:
  1. We are offering PSCs the benefit of a fully comprehensive contract review at only £185 + VAT. You receive a full report which considers both the contractual terms and the working practices, and which will provide a clear unbiased and independent opinion – an opinion which could save you thousands of pounds if HMRC do start an enquiry. 
As a contractor operating through a PSC, you can’t afford to wait until April 2020 to deal with the changes in IR35, you need to fully appreciate your tax position, now
 
Contact 03450 660 035 for further information or email us at IR35@markel.com.
 
Tagged IR35
Next article in series

19 Nov 2019

IR35 in the Private Sector: Protecting 'fee payers'

Whilst we wait for the election to unfold and then hopefully a government to be formed and then early in the new year a budget, forward thinking agencies who will be fee payers in this new regime and some end clients who engage directly, are worried about the implications of getting the decision wrong.