Lords committee to investigate IR35 rule change
5 Feb 2020
The House of Lords Finance Bill Sub-Committee has launched an inquiry into government plans to introduce off-payroll working rules for the private sector, with concerns about whether the impact has been fully assessed
5 Feb 2020
With less than two months until the rules come into force, amidst heavy criticism of the rushed introduction of the private sector measures, the Lords’ inquiry has a wide remit, but it may be too little too late.
Under the proposals, businesses will be responsible for deciding whether contractors they hire are liable to pay income tax and national insurance contributions (NICs), extending PAYE status to these workers and associated employer NIC liabilities.
As part of its inquiry on the draft Finance Bill 2019-20, the committee has issued a call for evidence from affected parties, including contracts, affected businesses and the tax profession.
The inquiry will focus on the government's proposal to extend the off-payroll working rules to large and medium-sized organisations in the private sector from April 2020, three years since the public sector were forced to change contractor employment status.
It will focus on whether the government and HMRC has conducted sufficient assessment of the impact on private sector companies, awareness of the obligations by the wider supply chain from hirers to contractors and sub-contractors, the role of umbrella companies and the wider impact on the gig economy.
It is also looking for evidence on whether the tests for determining employment under the rules are sufficiently clear to engagers and workers, as well as stakeholders’ views of HMRC’s Check Employment Status for Tax (CEST) tool, which is used as the key determining factor for deciding whether a contractor falls under IR35.
The Sub-Committee wants to know about the real-life experiences of individuals and organisations, as well as more general responses, for example, relating to the impact of these (and predecessor) measures on the tax classification of workers and the broader impact on the labour market.
The call for evidence will also consider the interaction between the growth of the gig economy and how the off-payroll working rules ‘relate to the wider context of changes in working arrangements, including the gig economy? Is it fair that some individuals are taxed as if they are employees, but do not have the rights of employees?’.
Lord Forsyth of Drumlean, chair of the Finance Bill Sub-Committee, said: ‘The Government is proposing to extend the off-payroll working rules to large and medium-sized organisations in the private sector.
‘We are interested in how this change will work in practice, and how it relates to wider changes in working arrangements.
‘To inform our work we want to hear from as broad a range of people and organisations as possible. If you have a view on off-payroll working rules, please let us know what you think.’
HMRC has already released guidance on the off-payroll working rules for private sector organisations and legislation has been drafted.
The Treasury continues to stress that it has no plans to delay the introduction from 6 April, despite not yet releasing the outcome of a review of the proposals, announced in early January.
Last month, a Treasury spokesperson told Accountancy Daily: ‘Our changes to off-payroll working ensure that individuals sitting side-by-side and doing the same work for the same employer pay the same tax and national insurance contributions.
‘We’ve consulted widely on the details of the reform since announcing in October 2018, and are now reviewing the reforms, working with stakeholders to see what further actions we can take to ensure their smooth implementation.’
The deadline for submission of written evidence is 25 February 2020.