Extending IR35 to the private sector could introduce “a complex web of new rules and liabilities throughout supply chains”.
Medium and large companies in the private sector are set to be responsible for determining the tax status of contractors from April 2020.
With that date looming, the Association of Chartered Certified Accountants (ACCA) has called for a one-year delay in the expansion of the legislation.
It believes a stay of execution will provide enough time to allow a full appraisal of the proposed rules and consider the best way forward for HMRC.
Off-payroll rules were reformed for contractors in the public sector in April 2017, with the aim of preventing what the Revenue regards as ‘disguised employment’.
Lilly Aaron, policy manager at ACCA Europe, said:
“On the surface, this legislation aims to tackle contrived working practices that may disguise the true nature of the relationship between a worker and client.
“In practice, however, this reform could create a complex web of new rules and liabilities throughout supply chains, causing confusion over employment status and where tax liabilities rest.
“There are a lot of lessons to be learned from these rules being introduced to the public sector [in 2017], and it is essential we get this right the first time for the private sector to give businesses some certainty.”
The ACCA, the Chartered Institute of Taxation, and the Institute of Chartered Accountants in England and Wales previously flagged other issues with IR35 in the public sector.
These included the complexity of the off-payroll arrangements and the accuracy of the Check Employment Status for Tax (CEST) assessment tool.
Responses to HMRC’s off-payroll working rules from April 2020 consultation recently closed, giving the Government plenty of food for thought.
Should no further changes be announced, the tax treatment of off-payroll work in the private sector will mirror that implemented in the public sector.
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