Currently, when HMRC finds that a client has made a mistake in applying the off-payroll working rules, the deemed employer is assessed for income tax, national insurance contributions (NIC) and the apprenticeship levy (where relevant). This assessment takes no account of taxes paid by the contractor or their personal service company.
However, the November 2023 Autumn Statement provided welcome confirmation that a limited set-off for the taxes paid by the contractor or their personal service company will be introduced from April 2024.
This will be achieved by allowing HMRC to set off taxes estimated to have already been paid by the worker or their intermediary against a deemed employer’s subsequent PAYE liability. This will ensure that the cost of the liability is shared more fairly between the deemed employer and the worker.
The policy paper published with the Autumn Statement explains how the new regulations will apply.
- In cases where the deemed employer of an individual who worked via their own intermediary would be liable to pay an amount under PAYE regulations in respect of an engagement, and an amount of income tax or corporation tax is estimated to have already been paid or assessed in relation to the engagement, the amount will be treated as having been recovered from the individual or intermediary, and that amount will not be recoverable from the deemed employer.
- This amount treated as having been recovered will be the best estimate that can reasonably be made by an officer of HMRC in respect of the income tax or corporation tax already paid or assessed.
- Provision will be made to prevent a person making a claim for the repayment of, or a claim for relief in respect of, deducting, or setting off the amount treated as having been recovered.
- The provisions will be in respect of deemed direct payments made on or after 6 April 2017.
On 22 November 2023, Chancellor Jeremy Hunt delivered the Autumn Statement. Read ICAEW's analysis and reaction.
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