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The long anticipated consultation on the reform of rules governing off-payroll working in the private sector, often referred to as IR35, has now been published.  In addition, the Government has published the findings from an independent research project that looked at the immediate impacts on public sector bodies of implementing the reform of off-payroll working in the public sector.

It is clear that the following areas could potentially add significant additional administrative burdens to employers in order to ensure they comply:

  • A process to accurately assess the employment status of workers.
  • A requirement to provide not only the status decision to the worker but the reasons for that decision.
  • An appeals process for dealing with worker disagreements.
  • A process to identify each intermediary in the supply chain and specific details of the worker.

The consultation pulls no punches in setting out the Government’s view on the current level of non-compliance with the tax rules for off-payroll workers in the private sector, and hence the need for reform.  It states several times that HMRC estimates that only 10% of workers who should operate the IR35 rules currently do so. It estimates the costs of non-compliance in the private sector to currently be £700 million, with a projected increase to £1.2 billion by 2022/23.  Overall, the consultation sets out a very stark picture of what it refers to as “endemic non-compliance for off-payroll engagements in the private sector”.

The document goes on to highlight the difficulties HMRC face in enforcing the current IR35 rules, with each Personal Service Company (PSC) having to be reviewed individually, each requiring separate data requests and meetings etc.  All of this can take an extended time period and, even where the PSC is ultimately found to be liable for additional tax and NICs, collection can be a further challenge.