Agencies and false self-employment

On the back of the Autumn Statement, HMRC has issued a consultation to establish agencies (the first in the chain) as responsible for the worker’s tax and national insurance contributions, in a bid to end false self-employment.

Will this get traction? Well I think so.

Reading through the consultation document, the intent is clear. While this will heap yet more administration onto agencies it will provide HMRC with a clear understanding of who is contracting and using which model – for the very first time.

The mechanics of it are now becoming clear – the agency will have to submit a quarterly return, similar to RTI submissions. This will identify who is doing what. HMRC can then put together a summary of each provider and investigate those models promoting 85/90% returns. About time too!

What is good and encouraging is that PSCs and Umbrellas are clearly outside this scope and workers using these models will not be targeted.

So for agencies, having a PSL of compliant providers becomes even more important, especially as HMRC is looking to “transfer” any HMRC debt to the agencies should the providers not cough up…

Read More

Reviewing IR35 – The Select Committee on Personal Service Companies

The long-awaited IR35 review has finally come before the Select Committee on Personal Service Companies at the House of Lords, after their call for evidence in November.

The number of Personal Service Companies (PSCs) has increased and will probably continue to do so, while at the same time HMRC’s resources dwindle, so I can see why they would be keen to get this in order. Lots of submissions have been made both for and against IR35.

Interestingly, in November’s call for evidence, one of the House of Lords’ aims was to look at how PSCs were formed – so whether contractors are pressured by businesses to have a PSC, rather than joining an umbrella company. If they are forced should the responsibility for ensuring compliance with IR35 be placed on the business or the contractor? After all, in all practicality, PSCs are not the best choice for everyone, and of course, Managed Service Company legislation has not gone away.

The business entity test was the first step in reform, and was created to give clarity to contractors on how they stood with IR35, and can only help the House come to a final decision.

My view is that little will change. IR35, while not in the press through cases won, is a deterrent and most workers don’t want HMRC knocking on their door.

However, the big question on everyone’s mind is will dividend income be treated as earned income? If so, then IR35 has run its course.

Read More