On the back of new changes restricting tax relief on travel and subsistence expenses for temporary workers, independent professionals contracting through their own limited company / PSC are to face a new test to determine whether they are in/out-of-scope of IR35.
HMRC recently announced that the Government intends to introduce the new tests, including a new digital tool, for workers contracting through PSCs in the public sector in April next year. They have also stated that provided the information supplied was accurate, HMRC would stand by the results.
HMRC digital tool
The digital tool is aimed at determining whether a PSC worker is truly self-employed and therefore outside of IR35, in which case he or she may continue to be paid off-payroll. However, if the tool indicates that the worker is caught by IR35, they will have to be placed on the public sector payroll.
Industry stakeholders have already raised concerns about whether a digital tool could possibly deliver clear-cut answers on a worker’s tax status and HMRC have responded by acknowledging that no test could encompass everyone, as marginal cases will always exist, however, they believe that the majority would be covered.
A consultation document will be launched in the summer and draft legislation will follow in the autumn. In the interim, the Government has asked for stakeholder input in order to test the new rules and the digital tool.
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