Employment: Taxation

Treasury written question – answered on 7th October 2019.

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Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Foreign Intervention), Shadow PC Spokesperson (Business, Energy and Industrial Strategy)

To ask the Financial Secretary to the Treasury, how HMRC established its estimate that nine out of 10 contractors are not compliant with current off-payroll working rules in the private sector.

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Foreign Intervention), Shadow PC Spokesperson (Business, Energy and Industrial Strategy)

To ask the Chancellor of the Exchequer, what assessment HMRC has made of the potential loss of tax revenue resulting from a blanket determination of the tax status of individual contractors by private companies.

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Foreign Intervention), Shadow PC Spokesperson (Business, Energy and Industrial Strategy)

To ask the Chancellor of the Exchequer, what progress HMRC has made on establishing a status disagreement process to ensure that contractors can raise concerns directly with client companies.

Photo of Jesse Norman Jesse Norman Financial Secretary to the Treasury and Paymaster General

The off-payroll working rules (sometimes known as IR35) have been in place since 2000. They are designed to ensure that individuals working like employees pay broadly the same amount of tax and National Insurance Contributions, regardless of the structure they work through. They do not affect the self-employed.

Budget 2018 announced that reforms introduced in 2017 for the public sector would be extended to all sectors, from April 2020, giving businesses time to prepare. The Government has consulted extensively on the reform and HMRC are publishing guidance as well as delivering an education and support programme.

HMRC’s estimates for non-compliance with the off-payroll working rules are based on relevant tax return data.

HMRC continue to work with stakeholders to make improvements to the Check Employment Status for Tax (CEST) digital service and wider guidance. Enhancements will be rigorously tested with stakeholders, and operational and legal experts, and will be available for use later in 2019.

HMRC have been clear that it is not correct to rule all off-payroll workers to be within or outside the rules irrespective of their contractual terms and working arrangements. On 11 July 2019, HMRC published a Tax Information and Impact Note setting out the impact on individuals, households and families of the reform in the private sector. This can be found here: https://www.gov.uk/government/publications/rules-for-off-payroll-working-from-april-2020/rules-for-off-payroll-working-from-april-2020

The Government also published draft legislation on 11 July 2019 which sets out the status disagreement process that clients will need to implement in time for April 2020. HMRC have published guidance to support customers in making these changes which can be found here: https://www.gov.uk/guidance/april-2020-changes-to-off-payroll-working-for-clients

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