ICAS responds to HMRC consultation on IR35 in the private sector
By Justine Riccomini, Head of Taxation (Scottish Taxes, Employment and ICAS Tax Community)
31 May 2019
HMRC introduced a revised regime in April 2017 for the public sector for bodies engaging individuals through intermediaries. A second consultation on the revised private sector regime closed on 28 May 2019. Justine Riccomini reports on the proposals.
On 18 May 2018, HMRC issued a consultation into whether a similar regime to IR35 in the public sector should be brought in to the private sector. This was followed up by a further consultation issued on 5 March 2019 which considers how the proposed legislation would work in practice.
ICAS has responded to the recent consultation by addressing the questions within the document, but also by providing further information in respect of key issues and other general points which the Government should consider. The response has been informed by a roundtable event with HMRC hosted by ICAS, to which members of the ICAS OMB Taxes Committee and the Employment Taxes Working Group contributed, and attendance at other stakeholder meetings with HMRC.
The consultation terms of reference are very tightly drawn and do not include any discussion of employment status. Of course, employment status as a concept overarches this debate, and although an employment status consultation concluded on 6 June 2018, there has not been a formal response to this from HMRC. There has been a recent meeting to discuss how the Check Employment Status for Tax (CEST) tool will be configured, and changes are to be made, although the debate continues around HMRC’s refusal to consider Mutuality of Obligation as part of its status tool. The CEST tool must work to provide the correct outcome.
ICAS supports the need for HMRC to collect the right amount of tax at the right time from the right people. IR35 has not been a successful regime since its introduction 19 years ago in 2000. Nevertheless, with Brexit looming, the private sector may not need another cost and administration burden on its employers at this time and the next steps must be thought out carefully.
There are no easy answers. It is vital that at this stage of the process that the timing and methodology of the introduction of any new regime needs to be taken gradually and not rushed in to avoid having a negative impact on business stability and growth.