top of page
Search
Crawford Temple

Off-Payroll Legislation in the Private Sector

Off-payroll legislation, introduced on 6 April 2021, means that end clients of recruitment agencies (employers) are now responsible for determining the status of people that they engage(contractors). Designed to reinforce anti-tax avoidance, the legislation seeks to ensure that where applicable the workers’ fees, either paid to a Personal Service Company or directly to the worker themselves, are subject to PAYE.


With doubts arising on the effectiveness of these off-payroll rules, we look at the rise of disguised remuneration schemes and what needs to be changed.


The effect on clients

The changes mean that clients are legally obligated to determine the tax status of a contractor before the engagement begins and, if they are using an agency to source the contractor, inform both the agency and contractor of their decision. They must not only confirm the status but also the reasons why they have reached this conclusion.


The effect on contractors

As a result of these changes many contractors are now classed as being ‘inside IR35’ and are facing tax bills which reflect this – often with reduced net pay. This has led to some contractors engaging with payroll companies who claim to offer higher gross pay, offering a small proportion of their earnings via PAYE and listing the rest under other amounts – many of which take the form of loans.


Despite how attractive these schemes may seem, they are illegal and anyone who signs up to one faces severe financial and personal penalties.


Serious concerns

Recently Crawford Temple, CEO of Professional Passport, has been sharing his concerns with The Finance Bill Sub-Committee on how the Off-Payroll legislation works, or otherwise, in the private sector.


The Off-Payroll rules, he says, are driving UK workers abroad, leading to a significant skills gap. Furthermore, the proliferation of disguised remuneration schemes has led to an increasing number of contractors unwittingly signing up for tax avoidance schemes which could seriously impact their financial futures.


Not enough is being done to deal with the promoters of these schemes and, in fact, HMRC’s focus appears to be on the victims of disguised remuneration schemes, rather than the perpetrators of them. Recently, letters warning contractors of tax avoidance have been issued, implying that they have been involved with such schemes, and while it is a timely reminder to avoid them, it is the wrong strategy. HMRC should be focusing its efforts on the providers of such disguised remuneration schemes, rather than incentivising them and encouraging them to thrive.


We now ask why HMRC has not acted on the data that it holds to step up its enforcement activity, rather than victimise well-intentioned workers who simply want to make a living?

If you're looking to work with a provider that’s earned a legitimate seal of approval, head to the Professional Passport Approved Providers list or find out more about becoming a Supply Chain Member today.


40 views0 comments

Opmerkingen


Post: Blog2_Post
bottom of page