Off-payroll working – updated guidance from HMRC

Following feedback from ICAEW Tax Faculty, HMRC has updated some of its guidance in relation to off-payroll working.

Accounting for the contract fee in the personal service company

The Tax Faculty expressed concerns over HMRC’s original guidance which stated that turnover should be reported net of income tax and national insurance contributions in the personal service company’s (PSC) accounts. While this might be acceptable for tax purposes, it will always be important to ensure that the accounts of a PSC are prepared in accordance with UK GAAP, and for many PSCs this means that turnover should be accounted for as the gross amount (less any VAT). We originally alerted members to this in our previous news item.

Following discussions with HMRC we are pleased to announce that gov.uk has now been updated to reflect our concerns, and paragraph 13 of the technical note now reads:

“HMRC will accept accounts that have been prepared under either a gross or net receipt basis since the tax result is the same. But preparers of the accounts will need to consider the most suitable approach to ensure the financial statements are prepared in accordance with UK GAAP.”

Off-payroll working in the private sector – prepare now

Ahead of the proposed changes to off-payroll working in the private sector from April 2020, HMRC has published guidance to help businesses prepare. Again, this follows concerns raised by the Tax Faculty that many businesses were unaware of the new rules which will place responsibility for determining the employment status of workers on the engager. There is an exemption for small engagers, in which case the current “IR35” rules will continue to apply and the individual remains responsible for determining their status.

Consultation

The Tax Faculty will be submitting a response to this consultation on behalf of ICAEW. Please send any comments directly to sarah.ghaffari@icaew.com. For more detail about the proposed changes ICAEW members can access a recording of the Tax Faculty webinar off-payroll working in the private sector – the consultation proposals.

You can also respond directly to the consultation by emailing offpayrollworking.intheprivatesectorconsultation@hmrc.gsi.gov.uk by 28 May 2019.

IR35 in a nutshell

For an introduction to IR35, what it is and why it is important, see TAXbite: IR35 – an overview.

This TAXbite introduces IR35 covering essentials such as employed vs self-employed, the differences in tax rates and knowing when the rules apply.

TAXbites provide a brief reminder of the basics on popular topics. Each recording lasts around 10 minutes and is freely available for all to view

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