HMRC recently published a consultation paper called ‘off payroll working in the private sector”. You can read it here…
It makes three suggestions for how independents and their clients successfully operate in the IR35 environment.
1. Extend the public sector rules to the private sector
2. Change the record keeping requirements
3. Requiring businesses to ‘secure’ their supply chains.
These seek in one way or another, as I read it, to shift the onus of proof that someone that is hired to perform a role is not an employee from the supplier to the client, and make it harder for small businesses to prosper. The proposed penalties mean, again as I read it, that most hiring organisations will have to assume, unless positive proof is provided, that a supplier is subject to IR35.
That means our invoices will be treated, to all intents and purposes, as salary and tax and national insurance (and employers NI) will be deducted before they are paid. That’s going to be a shock to many of the million or so people who run limited companies with only one or two directors. Myself included.
Perhaps what’s more worrying is the language of the consultation document. The title itself implies that ‘payroll working’ is the norm that the HMRC seeks. Yet the trend to self employment and independent portfolio careers is clear. Many people are, or will be, at various points in their careers, be working on a model that HMRC seems unconsciously biased against. That’s quite alarming. The consultation also talks regularly of ‘non-compliance’ when a director pays a tax and NI minimising salary and pays corporation tax on profits before distributing that income as dividend, yet this is a fair and legal application of other HMRC rules.
There’s a real danger, in my opinion, in these proposals, of stifling innovation, rewarding compliance, and not entrepreneurship, of locking people into unsuitable employment, and shifting the balance of control.
We’ll keep an eye on these consultations and let you know in the comments here how things develop, I will be making a representation as part of the consultation and will take account of comments here should you wish to make any.
You might have gathered that I’m currently not a fan, but what are your views?