[UK] HMRC launches IR35 offset consultation

The UK government will seek views on the ‘IR35 offset issue’, ContractorUK reports.

Publishing an eight-part consultation on April 27, HMRC said it is seeking feedback between now and June 22 on the introduction of an offset mechanism into the off-payroll rules.

Views on changes to the rules as a whole are reportedly not invited, however, the “set-off” will be given against the deemed employer income tax liabilities and the worker employee NIC deductions.

ContractorUK says the set-off will potentially work in a similar manner to existing provisions in the PAYE Regulations 2003. These allow the setting off of taxes already paid in certain circumstances.

Eight objectives and 10 questions are open for response so HMRC may receive “views on the policy before deciding on the best way to address the issue,” ideally as soon as April 2023.

“Double taxation of the same income is a well-known deficiency in the off-payroll rules,” Brookson’s Matt Fryer - aware of no such acknowledgement in the HMRC consultation - told ContractorUK.

“So it’s welcome that HMRC has finally published a consultation on this issue…[which the consultation says] should hopefully result in changes…from April 6th 2024.”

Status adviser Rebecca Seeley Harris agreed that fixing the fact that “HMRC may end up collecting more tax than is due,” as the consultation tentatively puts it, is long overdue.

“About time is what I say,” Ms Seeley Harris told ContractorUK. “Both myself and Qdos’s Seb Maley approached HMRC about the question of the offset back in 2020.

“Although we’ve all known about it since 2017, for the last few years, HMRC has just said ‘there is no offset’ despite it effectively being double-taxation. I’m glad it is consulting.”

In a statement, Mr Maley reportedly confirmed that Whitehall has known that HMRC doesn’t factor in tax already paid by the contractor on an IR35 non-compliant engagement for “some time.”

“I’m amazed that the government has refused to look into this until now,” the Qdos boss said yesterday, welcoming the consultation.

“Westminster knew this was a problem…but has done nothing…[so the consultation] is potentially game-changing…[as] it’s an issue which can and should be solved relatively easily.”

ReLegal Consulting - founded by Ms Seeley Harris - isn’t as sure, telling ContractorUK that it doesn’t “actually think there is an easy solution” to the IR35 offset issue.

HMRC could potentially have reservations too, cautioning in the consultation that “a solution to this issue may not achieve all of the [eight] objectives, and some compromise is likely to be required.”

The Revenue currently proposes that the different taxes and classes of NICs that would be included as part of a set-off would include corporation tax, paid by a worker’s PSC on the income from the off-payroll working engagement.

Income tax and employee NICs paid on a salary to the worker from the worker’s intermediary would also be included, as would Class 2/4 NICs -- where the intermediary is a partnership or another individual.

HMRC also proposes the set-off to cover tax paid on dividends received by a worker from the PSC, where the dividends are paid out of income from the off-payroll working engagement.

Source: ContractorUK

(Links and quotes via original reporting)

The UK government will seek views on the ‘IR35 offset issue’, ContractorUK reports.

Publishing an eight-part consultation on April 27, HMRC said it is seeking feedback between now and June 22 on the introduction of an offset mechanism into the off-payroll rules.

Views on changes to the rules as a whole are reportedly not invited, however, the “set-off” will be given against the deemed employer income tax liabilities and the worker employee NIC deductions.

ContractorUK says the set-off will potentially work in a similar manner to existing provisions in the PAYE Regulations 2003. These allow the setting off of taxes already paid in certain circumstances.

Eight objectives and 10 questions are open for response so HMRC may receive “views on the policy before deciding on the best way to address the issue,” ideally as soon as April 2023.

“Double taxation of the same income is a well-known deficiency in the off-payroll rules,” Brookson’s Matt Fryer - aware of no such acknowledgement in the HMRC consultation - told ContractorUK.

“So it’s welcome that HMRC has finally published a consultation on this issue…[which the consultation says] should hopefully result in changes…from April 6th 2024.”

Status adviser Rebecca Seeley Harris agreed that fixing the fact that “HMRC may end up collecting more tax than is due,” as the consultation tentatively puts it, is long overdue.

“About time is what I say,” Ms Seeley Harris told ContractorUK. “Both myself and Qdos’s Seb Maley approached HMRC about the question of the offset back in 2020.

“Although we’ve all known about it since 2017, for the last few years, HMRC has just said ‘there is no offset’ despite it effectively being double-taxation. I’m glad it is consulting.”

In a statement, Mr Maley reportedly confirmed that Whitehall has known that HMRC doesn’t factor in tax already paid by the contractor on an IR35 non-compliant engagement for “some time.”

“I’m amazed that the government has refused to look into this until now,” the Qdos boss said yesterday, welcoming the consultation.

“Westminster knew this was a problem…but has done nothing…[so the consultation] is potentially game-changing…[as] it’s an issue which can and should be solved relatively easily.”

ReLegal Consulting - founded by Ms Seeley Harris - isn’t as sure, telling ContractorUK that it doesn’t “actually think there is an easy solution” to the IR35 offset issue.

HMRC could potentially have reservations too, cautioning in the consultation that “a solution to this issue may not achieve all of the [eight] objectives, and some compromise is likely to be required.”

The Revenue currently proposes that the different taxes and classes of NICs that would be included as part of a set-off would include corporation tax, paid by a worker’s PSC on the income from the off-payroll working engagement.

Income tax and employee NICs paid on a salary to the worker from the worker’s intermediary would also be included, as would Class 2/4 NICs -- where the intermediary is a partnership or another individual.

HMRC also proposes the set-off to cover tax paid on dividends received by a worker from the PSC, where the dividends are paid out of income from the off-payroll working engagement.

Source: ContractorUK

(Links and quotes via original reporting)