The start date of amending the off-payrolling rules and extending it to the private sector should be put back to 6 April 2021 to allow all stakeholders – including HMRC – time to prepare on the basis of enacted legislation that provided certainty and resolves operational issues.
ICAEW Tax Faculty expressed this view in its response (ICAEW REP 86/19) to HMRC’s invitation to comment on draft legislation published in July 2019.
The draft legislation is intended to align the tax treatment for payments made for workers’ services provided through intermediaries, where the client is a medium or large organisation, in the private sector with the tax treatment for payments made for workers’ services provided through intermediaries where the client is a public sector organisation.
The proposed legislation is ambiguous and falls below our principles that tax legislation should be simple, certain and properly targeted. The draft legislation contains gaps that HMRC is having to address by providing extensive guidance. Onerous responsibilities are allocated in an uncertain way. It is unlikely to enhance compliance with the existing IR35 legislation that HMRC has struggled to enforce effectively since 2000.
The draft legislation highlights that this is a sticking plaster solution to a underlying policy problem that needs a long term solution which does not impose excessive compliance burdens or incentivise one type of employment status over another.
The start date should be delayed until April 2021 to enable all stakeholders, including HMRC, properly to prepare on the basis for this change: this includes the need for the legislation to be improved, operational issues to be resolved and the final IT specifications to be published. In addition, further work needs to be done to improve the ‘Check Employment Status Tool’ (CEST) and for HMRC to publish further guidance.
As to the draft legislation itself our recommendations include:
Detail is key and too many operational points remain unresolved even though the public sector regime has been in force since April 2017. We are in separate discussions with HMRC on these points.
This consultation has highlighted the need to provide a ‘tracked changes’ version of the current legislation that is being amended by these provisions: without such a document it is difficult even for tax and legal professionals to understand how the revised legislation will work. We recommend that for the future, best practice when inviting comments should be to publish a ‘tracked changes’ document as part of the consultation package, and alongside the draft Finance Bill legislation. That will enable all stakeholders to understand exactly what the changes mean.