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Push private sector IR35 back to 2020, ICAEW warns

ICAEW believes it is too soon for the IR35 changes in the public sector to be rolled out to the private as the complex system is not yet ready to be launched and will clash with Making Tax Digital and Brexit.

November 2018

Many public sector bodies use private contractors to supplement their employee workforce. Since April 2017, new rules have placed the responsibility for determining the employment status of the contractors engaged to carry out such public sector contracts on to the engager rather than the worker.

ICAEW believes that the greater issue of how workers are taxed needs to be tackled, and that similar work should be taxed in the same way. Further piecemeal change will merely cause greater confusion.

Sarah Ghaffari, ICAEW Technical Tax Manager, says: “UK businesses are already having to implement software and process changes for Making Tax Digital, and the full extent of the impact of Brexit is still unknown. Any change to the private sector should not be introduced until April 2020 at the earliest.”

Ghaffari argues there is a big opportunity for HMRC but there are three key policy issues that need to be addressed:

  1. The tax and legal status of workers should be the same. The rules are complex and not easily understood so having differences is confusing. This will make it easier for employers and employees to be certain of the contract and work they are undertaking.
  2. The tax and benefit differentials between different types of work need to be addressed.
  3. Off-payroll working in the private and public sectors should be taxed in the same way, giving all workers the same benefits.

She says: “When considering these changes, a holistic approach needs to be taken. Any solution for tax and national insurance should align with solutions for employment status. The current system is not sustainable with today’s modern working practices.”

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