BUSINESS URGES DELAY TO TAX CHANGES AFFECTING TEMPORARY WORKERS
‘A third of companies who regularly use contractors are completely unaware of the upcoming IR35 reforms from April 2020, new research shows.’
The taxation institute is calling for a 1 year delay given November Budget is cancelled, no legislation yet and a few other things going on. It’s a compelling argument ......
Research shows many businesses are underprepared as April deadline looms
Business and tax groups have demanded the government delay forthcoming sweeping changes that affect how UK companies hire temporary workers, as research revealed many businesses are underprepared.
Freelancers who work for private sector businesses and operate through a limited company currently assess whether they are employed or self-employed, and therefore liable for employee or corporate taxes.
But from April, the government is changing the “off-payroll” rules, known as IR35. All large and medium-sized UK companies will be responsible for assessing the contractors they use and liable for deducting income tax and national insurance if they deem them an employee.
The measures have been brought in to tackle what HM Revenue & Customs, the tax authority, calls “disguised employment”. This is when workers are treated like self-employed contractors, despite in effect being employees, meaning both sides pay lower taxes. HMRC estimates that only one in 10 people in the private sector who should be paying tax under the IR35 rules are doing so correctly.
There is a real lack of clarity as to how the off-payroll rules will operate in practice in the private sector
Jon Stride, Association of Taxation Technicians
“Many business leaders still feel unprepared for the IR35 changes, given the sheer complexity of the reforms and the limited bandwidth that firms have to deal with new regulations,” said Tej Parikh, chief economist at the Institute of Directors, a business lobby group. “It would be best to delay the changes, or adopt a light-touch approach to its enforcement, particularly while the economic environment remains challenging.”
The changes to the private sector were first consulted on in spring 2018, after being introduced in the public sector in 2017. They were widely expected to come into force in April this year. But in last year’s Budget the then chancellor, Philip Hammond, said he had listened to business concerns and pushed back the rollout to April 2020.
Despite this extra time, the legislation needed to enact the reform has not yet been passed. Richard Hill, head of Legal Resourcing at Konexo, a division of law firm Eversheds Sutherland, said he expected it to be part of a finance bill early next year.
However, the Association of Taxation Technicians, a professional body, said the cancellation of next month’s Budget and an imminent general election, had further pushed back the schedule.
“There is a real lack of clarity as to how the off-payroll rules will operate in practice in the private sector,” said Jon Stride, co-chair of ATT’s technical steering group. “This makes it near impossible for businesses to make adequate preparations.”
He called for a delay until at least 2021 to provide more certainty.
Simon Winfield, managing director of recruiter Hays UK & Ireland, echoed this request, saying Brexit was already causing uncertainty for businesses.
His company on Wednesday published a survey of 31,500 participants, of which 11,000 were employers and 21,500 employees. It found that a third of companies who regularly use contractors were completely unaware of the upcoming reforms.
Of those that were aware, just 43 per cent had begun preparing for the changes, one-fifth said they had not started preparing at all, while 37 per cent said they were unsure if preparations were under way.
HMRC said independent research into the public sector reforms showed it did not disrupt public services or reduce market flexibility. The tax authority rejected claims it had not done enough to prepare businesses, suggesting a further delay would be unlikely.
“Following consultation, the government announced that the change for medium and large businesses wouldn’t come in until April 2020 . . . this has allowed them 18 months to prepare,” a spokesperson said.
HMRC said it was offering support to 2,000 of the UK’s biggest employers and direct communications to about 15,000 medium-sized businesses. It had also introduced workshops and online guidance.
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