The UK’s Office for Tax Simplification (OTS) has called on the UK Government to rethink its plans to reform the IR35 legislation, which covers those persons working through an intermediary.
IR35 may apply if someone is working for an organization through an intermediary, typically a Personal Service Company (PSC). If IR35 applies, all payments to an intermediary are treated as if they were the worker’s employment income, and the intermediary must pay any tax and National Insurance contributions (NICs) due.
Under the proposed changes, from April 2017, where workers are engaged through their own limited company, responsibility to apply the IR35 rules will fall to the public sector body, agency, or other third party paying the worker’s company. The public sector, body, agency, or other third party will be liable to pay any associated income tax and NICs.
The OTS has warned the Government that aspects of the proposals would introduce additional complexity into the tax system. It noted that those engaging taxpayers through intermediaries will see their administrative burden increase as a result of the requirement to request information to determine the taxpayer’s status. It noted also that the status test results may not be binding and therefore will lack certainty, and there may be possible boundary issues and market distortions between the private and public sector.
The OTS recommended that the Government consider launching a review of the taxation of the “flexible workforce.”
Welcoming the OTS’s recommendations, Crawford Temple, CEO of contract sector trade body PRISM, said: “The OTS’s response is an important intervention at a crucial time because they are the Government’s own advisory body on these issues.”
“The OTS’s remit is limited to taxation, so that’s why they have focused on tax in their call for a review. The weight of support for a strategic review that looks at everything including employment status, benefits, and employment rights is growing all the time.”
Source: tax-news.com
