IR35 review set to simplify guidelines on compliance


The off-payroll guidance for clients, contractors, and their intermediaries is set to be reviewed by HM Revenue & Customs (HMRC).

The review aims to provide a cost-benefit analysis of the effect of the rules, as these rules assess whether workers should be counted as employees and taxed at source.

They ensure that workers providing their services directly to the client pay roughly the same Income Tax and National Insurance contributions as employees.

However, HMRC has stated that it would not implement any changes before December 2023.

HMRC’s plan to review IR35 guidance comes because of criticism in a May 2022 report by the Public Accounts Committee (PAC).

The report stated that there were high levels of non-compliance with the IR35 rules as a direct result of “poor implementation by HMRC and other governing bodies.”

HMRC has stated it would expand its work to attain customer insight by collating outcomes from its existing compliance work to recognize common issues. It will also build on existing engagement with representative bodies.

An area of contention highlighted by the PAC report is that individuals feel that their determination is wrong, which means they pay more tax.

In response, HMRC stressed that anyone affected should file a self-assessment return. It will also look at how it can reduce the risks of double taxation.

There has been some backlash against HMRC’s point that if it disagrees with a customer’s self-assessment, the customer has the right to appeal the decision in an independent tribunal.

The cost of a tax tribunal for workers will far outweigh the initial cost of the overpaid tax and can sometimes take up to 10 years to resolve.

If you need advice on IR35, contact us today.