Lost tax and NICs, due to people not complying with the intermediaries legislation (IR35), amounts to around £420m a year according to estimates.
Because of this, the government are now consulting on proposals to improve compliance. Their consultation document suggests that the onus to verify the employment status of an individual be put on the ‘engager’. They are also considering changes to the IR35 test to bring it into line with that used for temporary workers, and setting a minimum length of time for an engagement to be considered one of employment.
Responding to the government’s proposals the Chartered Institute of Taxation (CIOT) has issued details of their own alternative suggestions for tackling the problem. These proposals would mean that organisations engaging with workers and their personal service company (PSC) would need to report annually to HMRC, based on the worker’s notification to them of whether or not IR35 applies. Using this approach, if the employing organisation misleads HMRC then any debt owed by the PSC in relation to non-compliance with IR35 would fall back on the employing organisation.
Further details are expected in the Autumn Statement later this month but if you’d like any help in the meantime please don’t hesitate to get in touch with us on 01782 279615.