HMRC have published their guidance for clients and intermediaries in preparation for the April 2020 off-payroll changes. While the guidance seeks to clarify the new responsibilities for parties in the supply chain, there’s already been criticism from contractor bodies that the guidance is unclear and unsatisfactory. The crux of the problem seems to be a lack of specific information on how the off-payroll rules should be implemented, making it difficult for clients and agencies to adequately prepare.
For example, despite being crucial to the process of IR35 determination, the Status Determination Statement completed by the client is still a vague concept. The guidance does not adequately explain what it is, or give examples for reference purposes, presumably because the concept is still in development. Subsequently, the requirement to take ‘reasonable care’ when making a determination is also not elaborated on.
Considering that failure to complete the determination, or making an incorrect determination, can result in tax liability for clients, the significant gaps in the guidance could have serious repercussions. As a result, clients who want to stay compliant and implement the rules correctly are likely to require expert help.
The guidance also leaves clients in doubt regarding the small business exemption as it uses the calendar year, rather than the tax year or company year, to determine at which point an increase in size makes a business responsible for applying the rules. HMRC also states that the rules will change from 6th April 2020, but fails to mention that contractors with contracts that span this date may require assessment long before then.
It’s likely that businesses and agencies will already struggle with their increased administrative duties from next April. Without adequate guidance to help them, they will be further disadvantaged. The gaps in the guidance means that clients and agencies have little choice but to submit to a process of trial and error. This means that there’s likely to be a repeat of the situation in the public sector when untested legislation was rushed through with negative consequences.
With HMRC hitting the headlines this month for sending out more scaremongering letters, it’s beginning to seem like a case of history repeating itself with contractors again bearing the brunt without the benefits.
Contracting Wise offer a range of support services for contractors and is in discussions with a new partner to offer viable solutions for all parties in the supply chain. To speak to a member of our team about how we can help you, call: 0203 642 8679