[UK] HMRC updates IR35 ‘deemed employer’ guidance

HMRC has updated its IR35 ‘deemed employer’ guidance, as part of a series of off-payroll resource changes which are “worth a review”, Contractor UK reports.

However, visitors to the deemed employer page may be thrown by the update notes dated March 7 which only read, “Details of the off-payroll working rules prior to April 2021 have been removed.”

HMRC actually made “multiple updates” to its IR35 guidance - mainly the deemed employer guidance - but other sections too for the IR35-affected, according to tax lawyer Rebecca Seeley Harris.

Asked if Ms Seeley Harris - the boss at ReLegal Consulting - is correct an HMRC spokesperson said, “We have simply made some minor changes to our guidance on the rules, to help make it clearer”.  

The HMRC spokesperson reportedly went on to cite four revised areas, with one of them ('improving the customer journey' in HMRC-terms) having four parts, concerned with providing, reordering, or increasing hyperlinks.

UK Contractor states that many observers will regard the updates, as a whole, as proof that HMRC expects Spring Budget 2023 to do nothing to the off-payroll rules but keep them in place.

'No IR35 rules have changed'

Of note is the fact that, while “no IR35 rules have changed” - as reiterated by the HMRC spokesperson - the update reflects the 2021 reforms being out of implementation and now in force.

Russel Upton - a director at Parasol - told Contractor UK that, following “whisperings” that IR35 may be contained in the chancellor’s March 15 statement, HMRC appears to have beaten him to the punch.

Mr Upton suggested that the Revenue may have even caught out HMT, as it has “moved more quickly” than its bedfellow department by updating eight IR35-related pages in total.

The eight include Off-payroll Working for Clients; Understanding Off-payroll working, Check if you’re an Employment Intermediary and Deemed Employer Responsibilities.

Ms Seeley Harris was previously seconded by HM Treasury to advise on IR35, she says she regards the responsibilities of the ‘deemed employer’ as “onerous.”

“The qualifying person at the lowest point in the labour supply chain in possession of the SDS… [is] responsible for paying the relevant tax for the deemed employee if they have received a SDS from the client that the contractor is inside IR35.

“They are not allowed to deduct the employer's taxes from the contractor's employment income,” she said. “So, unless they have made arrangements with the client, they will end up footing the bill themselves.”

However, where a client issues an outside IR35 determination to the PSC and HMRC then succeeds in challenging it, it is the fee-payer, as the deemed employer, who will be liable for back tax.

Ms Seeley Harris added, “So, as long as the client has taken reasonable care, despite the fact that the feepayer has no part in the decision-making, it is they who will end up with a bill for tax. This is the worst part of the legislation for me.”

Mr  Upton confirmed that the ‘deemed employer’ not being a fixed party ‘adds yet more complexity to a set of rules already widely misunderstood by many'.

'Vital new piece in the off-payroll puzzle'

A contingent workforce strategy expert, however, is clearly pleased that there is now refreshed guidance on the deemed employer for off-payroll purposes, alongside seven other revised off-payroll pages on .gov.

By contrast with HMRC’s characterisation of the updates as minor in importance, the expert, Marta Eccles told Contractor UK the deemed employer page alone was a “vital new piece" to consider in the IR35 and off-payroll working rules “puzzle.”

Source: Contractor UK

(Links and quotes via original reporting)

HMRC has updated its IR35 ‘deemed employer’ guidance, as part of a series of off-payroll resource changes which are “worth a review”, Contractor UK reports.

However, visitors to the deemed employer page may be thrown by the update notes dated March 7 which only read, “Details of the off-payroll working rules prior to April 2021 have been removed.”

HMRC actually made “multiple updates” to its IR35 guidance - mainly the deemed employer guidance - but other sections too for the IR35-affected, according to tax lawyer Rebecca Seeley Harris.

Asked if Ms Seeley Harris - the boss at ReLegal Consulting - is correct an HMRC spokesperson said, “We have simply made some minor changes to our guidance on the rules, to help make it clearer”.  

The HMRC spokesperson reportedly went on to cite four revised areas, with one of them ('improving the customer journey' in HMRC-terms) having four parts, concerned with providing, reordering, or increasing hyperlinks.

UK Contractor states that many observers will regard the updates, as a whole, as proof that HMRC expects Spring Budget 2023 to do nothing to the off-payroll rules but keep them in place.

'No IR35 rules have changed'

Of note is the fact that, while “no IR35 rules have changed” - as reiterated by the HMRC spokesperson - the update reflects the 2021 reforms being out of implementation and now in force.

Russel Upton - a director at Parasol - told Contractor UK that, following “whisperings” that IR35 may be contained in the chancellor’s March 15 statement, HMRC appears to have beaten him to the punch.

Mr Upton suggested that the Revenue may have even caught out HMT, as it has “moved more quickly” than its bedfellow department by updating eight IR35-related pages in total.

The eight include Off-payroll Working for Clients; Understanding Off-payroll working, Check if you’re an Employment Intermediary and Deemed Employer Responsibilities.

Ms Seeley Harris was previously seconded by HM Treasury to advise on IR35, she says she regards the responsibilities of the ‘deemed employer’ as “onerous.”

“The qualifying person at the lowest point in the labour supply chain in possession of the SDS… [is] responsible for paying the relevant tax for the deemed employee if they have received a SDS from the client that the contractor is inside IR35.

“They are not allowed to deduct the employer's taxes from the contractor's employment income,” she said. “So, unless they have made arrangements with the client, they will end up footing the bill themselves.”

However, where a client issues an outside IR35 determination to the PSC and HMRC then succeeds in challenging it, it is the fee-payer, as the deemed employer, who will be liable for back tax.

Ms Seeley Harris added, “So, as long as the client has taken reasonable care, despite the fact that the feepayer has no part in the decision-making, it is they who will end up with a bill for tax. This is the worst part of the legislation for me.”

Mr  Upton confirmed that the ‘deemed employer’ not being a fixed party ‘adds yet more complexity to a set of rules already widely misunderstood by many'.

'Vital new piece in the off-payroll puzzle'

A contingent workforce strategy expert, however, is clearly pleased that there is now refreshed guidance on the deemed employer for off-payroll purposes, alongside seven other revised off-payroll pages on .gov.

By contrast with HMRC’s characterisation of the updates as minor in importance, the expert, Marta Eccles told Contractor UK the deemed employer page alone was a “vital new piece" to consider in the IR35 and off-payroll working rules “puzzle.”

Source: Contractor UK

(Links and quotes via original reporting)