Update CEST by October, delay IR35 reform until 2021, HMRC told

October 2019 must be the deadline to launch the improvements to CEST, if the private sector is to have a fighting chance of adopting IR35 reform by April 2020, HMRC has been told.

A chartered tax body says October is the absolute “latest” to unveil the modified tool, so that individuals and businesses can have a full six months to review new and existing contracts.

Getting the improved CEST live by October will allow its changes to “bed down” before final decisions on IR35 status are taken, says the body – the Chartered Institute of Taxation.

'Wider breadth of IR35 scenarios'

In in its reply to the now-closed consultation on Off-Payroll Working in the Private Sector, the CIOT said CEST would hopefully be “better able to address a wider breath of scenarios.”

The Law Society, which has also responded to the HMRC consultation, prefers that CEST needs “a thorough overhaul,” or at least “additional investment” to make it “fit for purpose.”

But it stops short of the CIOT’s submission – which specifies the October 2019 deadline – by just saying the ‘overhaul’ needs doing “well before the extension” of the IR35 reforms.

'Not before April 2021'

Ironically, October 2019 is also when confidence in the contractor market could make its first return to positivity, thanks to the UK’s scheduled departure from the EU, according to IPSE.

But there is another month in the calendar proving even more popular with respondents to HMRC’s IR35 consultation: April -- of 2021.

“Go-live [for private sector IR35 reform] should not be before April 2021,” says the Institute of Chartered Accountants in England & Wales.

“April 2020 is too soon. Adequate lead time will be needed if off-payrolling changes are made in the private sector…[due to] operational and system issues that businesses will need to address.”

'At a loss'

“April 2020 is an unrealistic deadline -- implementation should be delayed for at least another year,” agrees Andy Chamberlain, deputy director of policy at IPSE.

“I am at a loss how businesses are expected to put processes in place in less than a year [from now], when HMRC fails to make correct determinations after 20 years.”

Former contractor Chris Bryce, IPSE’s chair added: “The chancellor simply must scrap this plan but even a one year delay would give everyone proper time to reflect and properly review”.

'Far from ready'

Bauer & Cottrell, a status advisory specialising in IR35, confirmed yesterday: “Businesses of all sizes are not ready for this. 

“HMRC is far from ready for this. Software developers have already run out of time for this, and accountants and advisers and indeed HMRC are unable to explain now how this is all intended to work.”

Evidencing its later claim about HMRC, the advisory’s Kate Cottrell said many of the Revenue’s questions in the consultation, and its commentary, display “an enormous lack of understanding.”

'Too late in the day'

“[In particular], to how the private sector operates and how supply chains work,” she said.

“But it’s too late in the day [for HMRC] to be asking these questions. So how can it be right to now enhance the CEST tool with a stated deadline of April 5th 2020?”

A law firm suggests it probably isn’t right, and so it sees an April 2020 commencement of the reforms – hailed as only second to IR35 itself in terms of their significance -- as unlikely.

Osborne Clark said: “The consultation closed on May 28th 2019, following which draft legislation will be published in the summer, probably July, for further consultation later in the year. Following that, it is likely that the legislation will not come into force in April 2020.”

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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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