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Clamp down on off-payroll working set for private sector

on Thursday, 24 May 2018.

Clamp down on off-payroll working set for private sector

A consultation to ensure contractors who effectively work as employees pay the right tax has been launched.

The government wants to tighten up IR35 rules, which were introduced in the year 2000 and are intended to stop individuals avoiding employment taxes by working through their own company. It estimates that in 90 per cent of cases within the private sector, IR35 is not correctly applied.

“It’s very important that we recognise the hard work of contractors across all sectors, who contribute to our growing economy,” said Financial Secretary to the Treasury, Mel Stride. “But it’s also right that we have a fair tax system that balances efficiency and simplicity for taxpayers, while also supporting our vital public services.”

“That’s why we’re consulting carefully and welcome a wide range of opinions and evidence on how to tackle non-compliance,” she said.

The consultation will look at how it can make IR35 rules work better to ensure that contractors pay the correct tax. It follows on from off-payroll working reforms that were rolled out in the public sector in April 2017.

Last year public authorities were made responsible for determining whether the IR35 rules apply and deducting and paying the appropriate taxes – previously this responsibility resided with the contractor. The government believes that the move has successfully increased compliance and has generated an additional £410 million in tax revenue.

The consultation into off-payroll working reforms in the private sector includes the option of extending the changes seen in the public sector to the private sector, although no decisions have been made. It draws upon the lessons from the public sector change, by consulting on how the rules can be improved for the private sector, and includes alternative options for addressing non-compliance.

The consultation seeks views on the best way to tackle non-compliance with the off-payroll working rules (IR35) in the private sector. It closes at 11:45pm on 10 August 2018.

To coincide with launch of the consultation, the government has released its research findings into the immediate impact of the off-payroll reform in the public sector. Its aim was to explore the impacts of the reform in key sectors by looking at possible effects on workforce structures, contractor rates and vacancies, and experiences of the implementation process.

The research findings have informed options in the consultation on how to tackle IR35 non-compliance in the private sector.