The Chancellor has today announced a number of measures which aim to ensure that those who are paid for employment services are taxed on those amounts as though they were earnings from employment.
Yesterday I was presenting on the new IR35 regime and while confidently assuring the audience that IR35 would not be deferred in the Budget, I had a momentary fear that I might be emulating BBC Weatherman Michael Fish on 15 October 1987 when he confirmed that there would be no hurricane the following day, but the Great Storm of 16 October 1987 was testament to how dangerous such predictions can be.
However, as predicted, the new rules on IR35, moves the responsibility for assessing the employment status of workers (who provide their services through a personal services intermediary (PSI)) up the labour chain to the engager and the responsibility for deducting PAYE and NIC on payments to those whose services are in the nature of an employment for tax purposes, to the party paying the PSI. The changes apply to medium and large private sector engagers as well as those in the public sector (who have been operating a similar version of IR35 since April 2017).
This leaves very little time for those who have not already started to map their off payroll working population and put in place policies and procedures to comply with the new rules, to get their house in order.
Those who are affected by CIS will not only have to navigate the complex interaction with IR35, but should also be aware that new legislation is to be introduced to prevent non-compliant businesses from using the CIS to claim tax refunds to which they are not entitled. A consultation will be published to introduce options on how to promote supply chain due diligence. Those affected should read the consultation and make representations where appropriate.
The April 2019 charge on loans from third parties made to employees in connection with employment was introduced in the 2016 Budget and since then has probably met some of the most vociferous opposition to a tax avoidance measure in the memory of many tax practitioners. This led to the government commissioning an independent review by Sir Amyas Morse.
The Chancellor has now announced that the Finance Bill will contain provisions bringing into law the proposed changes arising from Sir Amyas Morse’s Independent Loan Charge Review. Broadly this removes loans entered into before December 2010 from the charge. This is a very welcome change and produces a ‘fair’ result since prior to that date, the legislation which effectively outlawed the tax planning in question had not been introduced.
In a related move, the Budget announcements comment that disguised remuneration schemes continue to be used, though in practice these are rarely seen by the writer. As a result, a call for evidence on further action to stamp out these schemes has been announced. It will be interesting to see if such schemes are still as widely used as the Chancellor suspects, given the strong message from most tax advisors that schemes which seem to be too good to be true are generally exactly that, and should be avoided.
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