In Treasury minutes published on 5 August 2022, the UK government has agreed with all recommendations in the Public Accounts Committee’s report ‘Lessons from implementing IR35 reforms’ which was highly critical of the IR35 rules themselves and also HMRC’s implementation of those rules.
The government also takes issue with some of the report’s conclusions:
Recommendations to improve compliance in the public sector are accepted, but the government notes that HMRC has already undertaken an extensive programme of education and support. HMRC does not agree, for example, that developing an overall estimate of non-compliance (as suggested by PAC) is the best way to achieve the desired outcome. HMRC proposes to continue its current work around compliance, including engaging with the professional bodies.
PAC found that workers could not easily challenge incorrect status determinations, and asked HMRC to implement an efficient profess to address the problem. The government believes that the reforms introduced in recent years were the best way to ensure correct status from the outset (avoiding the need for challenge). It also outlines existing ‘appeal routes’.
PAC concluded that the impact of the reforms on workers and the labour market was not fully understood. The government notes the research already published on the short and long-term impacts of the public sector reforms, and will publish equivalent analysis for the private sector later in 2022.
PAC suggested that HMRC should proactively assess whether the reforms disproportionately affect particular sectors and identify how to address associated challenges. The government highlights sector-specific work undertaken by HMRC, but agrees that this should be expanded and commits to develop a stakeholder engagement strategy.
PAC suggested that HMRC should review how the IR35 rules work in practice and develop solutions to address problems. HMRC has set up a working group to consider the challenges where tax already paid by PSCs cannot be taken into account by the deemed employer leading to potential double taxation.
In Treasury minutes published on 5 August 2022, the UK government has agreed with all recommendations in the Public Accounts Committee’s report ‘Lessons from implementing IR35 reforms’ which was highly critical of the IR35 rules themselves and also HMRC’s implementation of those rules.
The government also takes issue with some of the report’s conclusions:
Recommendations to improve compliance in the public sector are accepted, but the government notes that HMRC has already undertaken an extensive programme of education and support. HMRC does not agree, for example, that developing an overall estimate of non-compliance (as suggested by PAC) is the best way to achieve the desired outcome. HMRC proposes to continue its current work around compliance, including engaging with the professional bodies.
PAC found that workers could not easily challenge incorrect status determinations, and asked HMRC to implement an efficient profess to address the problem. The government believes that the reforms introduced in recent years were the best way to ensure correct status from the outset (avoiding the need for challenge). It also outlines existing ‘appeal routes’.
PAC concluded that the impact of the reforms on workers and the labour market was not fully understood. The government notes the research already published on the short and long-term impacts of the public sector reforms, and will publish equivalent analysis for the private sector later in 2022.
PAC suggested that HMRC should proactively assess whether the reforms disproportionately affect particular sectors and identify how to address associated challenges. The government highlights sector-specific work undertaken by HMRC, but agrees that this should be expanded and commits to develop a stakeholder engagement strategy.
PAC suggested that HMRC should review how the IR35 rules work in practice and develop solutions to address problems. HMRC has set up a working group to consider the challenges where tax already paid by PSCs cannot be taken into account by the deemed employer leading to potential double taxation.
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