The responses to HMRC’s latest Off-Payroll consultation, as analysed by ContractorCalculator, have highlighted staunch opposition to the proposals. Multiple industry bodies are urging the government to delay its plans to extend the controversial anti-avoidance tax law IR35 to the private sector until April 2021.
In the autumn statement last year, it was announced that the new IR35 rules would be applied to the private sector from April 2020, with the aim being to close certain loopholes that allow people working through a Personal Service Company (PSC) to avoid tax contributions.
The consultation closed on 28 May 2019, with the summary of consultation responses revealing that respondents were unanimous in calling for further delays – mainly because businesses wouldn’t have enough time to prepare for the April 2020 rollout.
The feedback was gathered from various experts, including contractor accountants and the recruitment and legal sectors, and raised some serious concerns about the new proposals. This further fuelled the fears that the reforms could lead to blanket decisions on how contractors should be taxed, whilst also potentially putting off some organisations from hiring contractors altogether.
The main issues
A number of recurring issues were highlighted in the responses, and further recommendations were made. As well as a call to delay the reforms until April 2021, the more prominent points included:
- How the liability model is grossly unfair on compliant parties.
- The exemption for small companies being deemed unsuitable.
- Timing concerns for the proposals in relation to Brexit.
- A strong opposition to the client-led disagreement process.
- Calls for deemed employees to receive employment rights.
- HMRC’s Check Employment Status for Tax (CEST) tool is still not fit-for-purpose.
- Widespread non-compliance with the Off-Payroll rules in the public sector.
It is likely that when the tax changes do come into effect, there will be an increase in the number of company directors who will no longer be needing their limited company – as they will become employees or retire.
For many of those directors the Members’ Voluntary Liquidation (MVL) process will be their best option, as it is a very tax-efficient and affordable way to close down a solvent company.
The overwhelming view from the Accountancy profession is that the new rules will come into effect in the private sector – it is just a question of when. So, if you are a contractor, you should speak to your Accountant now to see how you are going to be affected by the changes.
When you are considering closing down your PSC / limited company, Clarke Bell can help you with our ‘£995 MVL’ service.
Contact us on 0161 907 4044 or [email protected] for free and confidential advice.