Taxman talks of 'off-payroll rules in the private sector'

The taxman has updated his guidance notes and uttered the words contractors say they dread the most -- “apply the off-payroll working rules in the private sector.”

Ominously for those who fear the rules’ extension, the HMRC webpage in question previously contained information on the private sector’s version of IR35, effective since 2000.

But a spokesman for HM Revenue & Customs yesterday denied to ContractorUK that the superseding was significant -- or signalled any legislative change.

“That’s completely incorrect,” he said, when told that HMRC’s online statement -- if “the client is in the private sector and the off-payroll working rules apply” -- implies end-user companies can potentially be caught by the April rules.  

“Only IR35 applies across the public and private sector,” added the spokesman, trying to differentiate the Intermediaries legislation. “[But] the new off-payroll rules require public bodies to operate PAYE”.

An ex-tax inspector sided with the department, saying the ‘private sector detail’ was probably added to the guidance to try to make it clearer which framework applies to which sector.

This perceived attempt at clarification from HMRC comes a day after Qdos said that having two separate systems for one single issue was “problematic,” even “nonsensical.”

And a contractor hiring specialist believes the government agrees, so is working on a fix -- extending the off-payroll rules to the private sector, to give IR35 status one system for all PSCs.

“I expect to see this in the private sector,” said Simon Bichara, former boss of HiredByMe. “[A] persistent rumour [is] that there is a team including contractors working on this in HMRC already”.

If his expectation is realised, he warns there will be “limited opportunity” for PSCs and their private clients to “head the changes off,” partly due to the legislative timetable he envisages.

“The big question is when,” acknowledges Qdos chief executive Seb Maley. “Personally, I think Brexit and recent political uncertainty mean 2019 is more likely than 2018”.

The Revenue was not keen to speculate on the future, preferring to stick with the present. “The key thing is that the IR35 rules have not changed one iota,” the spokesman said.

However, HMRC made a slight but potentially significant departure from the stance it has been noted to repeatedly take (‘no plans to roll-out the off-payroll rules beyond the public sector’).

“Only HM Treasury can decide on changing or widening the rules, HMRC applies the rules as decided by parliament,” the Revenue spokesman said. “[So] any changes to the rules are a matter for HM Treasury.”

Writing on LinkedIn, Mr Bichara reflected: “It doesn't take a rocket scientist to figure out [that] this is the Treasury's plan.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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