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UK Mulling Extending Recent IR35 Reforms To Private Sector

by Jason Gorringe, Tax-News.com, London

22 May 2018


On May 18, 2018, the UK Government launched a consultation on enhancing rules surrounding "off-payroll" working (the IR35 rules), to ensure that contractors who work through their own company pay the right tax.

As announced at the Autumn Budget, the consultation will specifically look at how to increase compliance with the existing "off-payroll" working rules. These rules mean that contractors such as IT and management consultants who work through their own company but who are in practice employed by a third party pay the right tax as employees.

Evidence suggests that the taxpayer could be missing up to GBP1.2bn (USD1.6bn) a year by 2023 as a result of people getting the rules wrong, and incorrectly paying tax as if they were self-employed, says the Government. The consultation will look at how to make these rules work better, it said, adding that the genuinely self-employed will not be affected.

The Financial Secretary to the Treasury, Mel Stride, said: "It's very important that we recognize the hard work of contractors across all sectors, who contribute to our growing economy. But it's also right that we have a fair tax system that balances efficiency and simplicity for taxpayers, while also supporting our vital public services. That's why we're consulting carefully and welcome a wide range of opinions and evidence on how to tackle non-compliance."

Last April, the Government reformed off-payroll working in the public sector, successfully increasing compliance. The change has meant GBP410m in additional revenue for the taxpayer, the Government said, adding: "This consultation includes the option of extending those reforms to the private sector, although no decisions have been made. It draws upon the lessons from the public sector change, by consulting on how the rules can be improved for the private sector, and includes alternative options for addressing non-compliance." The change for the public sector placed an onus on public authorities to determine whether the rules apply to the taxpayers they engage to provide services and to deduct and pay the appropriate taxes.

TAGS: compliance | tax | tax compliance | tax avoidance | public sector | employees | United Kingdom | payroll | contractors | individual income tax | services

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