PSC Committee: the 16 recommendations
We recommend that Her Majesty’s Revenue and Customs carry out and publish a detailed assessment of the current Exchequer protection figure and of the costs that taxpayers incur in dealing with IR35. This should enable a better assessment of whether the legislation is having the intended effect and is proportionate.
Whilst we recognise the complexities in merging income tax and National Insurance and the effect that this may have on the contributory principle, we recommend that the Government re-examine the longer term case for combining taxes on income and National Insurance.
We recommend that Her Majesty’s Revenue and Customs look again at whether they require complete and accurate responses to the “service company” questions on the personal tax return SA100 and the real time information employer year end declaration (formerly P35).
If Her Majesty’s Revenue and Customs decide that they need the information from those questions, we recommend that their completion should be made compulsory, backed up by the potential for penalties to be charged for incorrect answers or non-completion.
If Her Majesty’s Revenue and Customs retain the questions, we recommend that they revise the guidance notes accompanying the personal tax return SA100 and the real time information year end declaration by employers to make the relationship to IR35 clearer.
If Her Majesty’s Revenue and Customs decide that they do not need the information gained from the questions, we recommend that the questions be removed from the tax returns and declarations.
We recommend that Her Majesty’s Revenue and Customs articulate with greater clarity the costs they incur from IR35 compliance efforts and administration, and the relationship between those costs and the overall yield gained from the legislation.
We recommend that the Contract Review Service be publicised to greater effect, that Her Majesty’s Revenue and Customs investigate ways to encourage individuals to use the service and that they look into ways to bolster confidence in its independence and impartiality.
We recommend that Her Majesty’s Revenue and Customs undertake a full consultation on how the Business Entity Tests could work better to provide greater certainty for taxpayers.
We recommend that Her Majesty’s Revenue and Customs go to greater lengths to demonstrate that they are receptive to the feedback that is provided through the IR35 Forum and that they review the breadth of membership.
We recommend that the Government should develop and publish a short guide setting out the basic differences between employment and self-employment. The guidance should be published across multiple platforms, including both digital and paper, and should be made available to individuals working in all industries where intermediaries are prevalent.
We recommend that the Government includes within the remit of the Low Pay Commission a consideration of the use of personal service companies and umbrella companies by lower-paid workers, and the implications for pay, employment rights and statutory entitlements.
As it is clear from the evidence that abuse of the expenses dispensations operated by umbrella companies is taking place, we recommend that Her Majesty’s Revenue and Customs ensure that enforcement action is taken to end these abuses and to ensure that expenses dispensations are managed correctly.
We also recommend that Her Majesty’s Revenue and Customs should review its processes for granting and renewing expenses dispensations, in order to ensure that potentially high risk organisations are granted dispensations only when appropriate.
We recommend that the Government carry out an assessment of the extent to which off-payroll engagements are used elsewhere in the public sector, including by those earning less than £58,200 per annum.
As the guidance embodied in Procurement Policy Note 07/12 currently appears to be applied inconsistently across departments, we recommend that Her Majesty’s Treasury take a leading role in ensuring consistency of application and that it should go to greater lengths to monitor the implementation of the Procurement Policy Note 07/12 guidance across Government departments.
Editor’s Note: Further reporting and expert commentary on the Personal Service Companies Committee’s report will follow on ContractorUK.