Chancellor Philip Hammond has been urged to ensure that new IR35 rules which were phased in for the public sector in April 2017 are not extended to the private sector in the upcoming autumn Budget.
The calls come from employment intermediary PRISM, which says that the Chancellor must “stop and analyse” all evidence for and against an extension of the new off-payroll rules before his much-anticipated statement on 22 November.
The new rules, which have been in force for the public sector since the beginning of April, now see that public sector end clients are responsible for determining the IR35 status of the contractors and freelancers they provide work to.
Previously, such public bodies and recruitment agencies were not liable for defining the IR35 status of contractors.
Earlier this year, a U-turn on initial proposals saw the new IR35 rules extended to those contracting for the NHS, despite strong opposition.
Fears now abound that the off-payroll rules will soon be extended to the private sector, perhaps as part of the upcoming Budget announcements in November.
But PRISM Chief Executive Crawford Temple has warned that ‘superimposing’ the same legislation on the private sector could duplicate instances of non-compliance – as has been seen in the public sector since the reforms were first phased in earlier this year.
Mr Temple said: “Extending these rules to the private sector will exacerbate the problem and will not deliver the expected HMRC returns.
“[It] is highly unlikely that HMRC will be able to collect any taxes due from the non-compliant providers and therefore the anticipated tax gains will be significantly reduced,” he said.
The Chancellor is now being urged to consider a “structural reform of the tax system” ahead of his upcoming Budget, in a bid to iron out any issues caused by the IR35 reforms.
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