After HMRC’s discussion document into potential IR35 changes closed on 30 September 2015, I expected to have to wait until the Autumn Statement to find out what changes, if any, will be coming into force. However, just last week information about the changes was leaked and picked up by newspapers and APSCo. It appears that the discussion document was not just HMRC wasting time, but is in fact being used as a guide for changes that WILL be coming into force in the next 12 months. The discussion document suggested various updates, which ranged from minor administration changes to major legislation reforms. However, the one that made me pause for breath was the suggestion that those who engage a contractor (end clients or intermediaries) through an employment intermediary should be responsible for ensuring the right amount of employment taxes are paid. All who read this knew that engagers would err on the side of caution and therefore it would no longer be tax advantageous to work through an employment intermediary.
As of this week it appears the Treasury agrees with HMRC’s proposal and has approved the above changes, which will be confirmed at the Autumn Statement. The only difference is that it has been suggested contractors will be able to work for one or two months before the end client or intermediary has to decide whether or not they are subject to IR35. To make this decision, the end client or intermediary will need to conduct a supervision, direction or control test on the contractor. Contractors that work for more than one client should be exempt from this, but it is expected all others will be affected. Failure of applying the right amount of tax will result in unpaid taxes being recovered from other parties in the supply chain.
In regards to the supervision, direction or control test, there are rumours that an online platform will be developed to make it easier for clients or intermediaries to determine the correct employment status. However, this is yet to be confirmed. These changes are expected to be officially announced at the Autumn Statement on 25 November 2015. I suggest that those affected begin planning for these changes now as it appears the Treasury is in agreement with HMRC that the current IR35 system is costing the exchequer £430million each year, and is confident, either rightly or wrongly, that these changes will help the government reduce their spending.
It must be accepted that these changes are going to be coming into effect and we need to do all we can to lessen the blow. APSCo has already accepted this and is lobbying heavily in an attempt to extend the one or two month period before a decision has to be made about IR35 to six months. Furthermore, the organisation is trying to stress the importance of reliable tests for working out the employment status of a contractor to ensure mass false employment does not occur.
I hope I am wrong about these changes, but all of the evidence suggests only one. If have any questions in the run up to the Autumn Statement, please contact me at firstname.lastname@example.org.
Source: APSCo (http://www.apsco.org/)