The CIOT has suggested a new approach to tackle those who are ignoring or manipulating IR35 rules so they can avoid tax payments to HMRC. Its proposals were made in response to HMRC’s recently closed Intermediaries legislation (IR35): discussion document. HMRC has suggested transferring the IR35 compliance obligation from the worker and his/her personal service company (PSC) to the organisation that they are physically working for. It has also suggested replacing the existing IR35 test with a ‘supervision, direction or control’ test. The CIOT says it believes a better option would be to impose an annual reporting obligation on organisations that are engaging with these workers, based on the PSC notifying them whether or not it considers that IR35 applies; and that there should also be an obligation for the PSC to notify that organisation that it is committed to applying IR35.
Colin Ben-Nathan, chairman of the CIOT’s Employment Taxes Sub-Committee, said: ‘It is clearly wrong that some people get away without paying the correct amount of tax and NIC [and] HMRC needs to give greater publicity to its successes in IR35 cases. We strongly recommend that the annual reporting option we propose is seriously explored by HMRC, rather than imposing an obligation on businesses to account for tax and NIC at source on payments to PSCs as put forward in the discussion document.’
The CIOT has suggested a new approach to tackle those who are ignoring or manipulating IR35 rules so they can avoid tax payments to HMRC. Its proposals were made in response to HMRC’s recently closed Intermediaries legislation (IR35): discussion document. HMRC has suggested transferring the IR35 compliance obligation from the worker and his/her personal service company (PSC) to the organisation that they are physically working for. It has also suggested replacing the existing IR35 test with a ‘supervision, direction or control’ test. The CIOT says it believes a better option would be to impose an annual reporting obligation on organisations that are engaging with these workers, based on the PSC notifying them whether or not it considers that IR35 applies; and that there should also be an obligation for the PSC to notify that organisation that it is committed to applying IR35.
Colin Ben-Nathan, chairman of the CIOT’s Employment Taxes Sub-Committee, said: ‘It is clearly wrong that some people get away without paying the correct amount of tax and NIC [and] HMRC needs to give greater publicity to its successes in IR35 cases. We strongly recommend that the annual reporting option we propose is seriously explored by HMRC, rather than imposing an obligation on businesses to account for tax and NIC at source on payments to PSCs as put forward in the discussion document.’
