Members of the Association of Professional Staffing Companies (APSCo) have taken their time to feed their thoughts into the trade body’s official response to HMRC’s latest consultation on the implementation of the IR35 off-payroll rules for the private sector.

At three special working groups held in Manchester, London and another which was tailored for the trade body’s group of largest members, more than 87 APSCo members made their feelings clear about the controversial rules.

The Association also received written feedback from a further 51 members and spoke with many people in the industry at members’ meetings and forums during the consultation period.

During these events, members flagged up common concerns, including:

• Where liability sits in the supply chain
• When and how status determination should be made
• Communications to recruitment firms and workers
• The likely increase in demand for fixed-term project/statement of work services
• How recruitment firms can best prepare for the roll-out

Tania Bowers, General Counsel at APSCo, said: “APSCo members certainly stepped up to the plate in terms of engaging with the consultation.

“While the professional recruitment community generally maintains that extending public sector rules to the private sector is still not a preferred option and remain concerned about the industry and it’s client base being ready for next April, through engaging with the consultation process, we can at least influence how these changes are implemented.

“We hope that HMRC has the good sense to consider, and take heed of, the concerns and advice offered by those who know what’s happening on the ground. We look forward to seeing how our insight will shape the draft legislation which is expected to be published at the end of next month.”

Chartered Institute of Taxation (CIOT) has called on the in Government to make improvements to it’s online assessment tool for off-payroll working, warning that the new rules won’t operate effectively without it.

The Check Employment Status for Tax (CEST) tool has been developed by HM Revenue & Customs to help employers identify those contractors and consultants caught within the IR35 rules.

However, the CIOT said that the system needed to be significantly improved if the rollout of the off-payroll working rules to the private sector is not to lead to uncertainty and protracted disputes over tax status between businesses and workers.

HMRC have recently lost a number of tribunal cases on off-payroll working rules in the public sector, including the high-profile cases of Lorraine Kelly and Kaye Adams, and the tax authority has been forced to admit that the CEST tool only provides an accurate determination in 85 per cent of cases.

The CIOT has made a number of representations on the behalf of it’s members in HMRC’s ongoing consultation on how the off-payroll working rules will apply from 6 April 2020 when the plan is to extend them to all sectors (except small businesses).

Launched in April 2017, the CEST tool was designed to help businesses and workers decide the employment status of their engagement, but the CIOT says that it does not factor in all the criteria established by case law before it’s algorithms reach a decision on whether IR35 applies.

Former Principal Private Residence

If you are considering selling a rental property which at some point has been your principal private residence, there are substantial changes coming in April 2020 to the tax reliefs available.

Currently, the capital gain for the whole period of ownership is time apportioned between the months when it was your home and the months when it was a let property and you are not charged capital gains tax on the home portion and up to an additional 18 months at the end.

In addition to this Private Residence Relief, there is currently also something called Lettings Relief of up to £40,000 available to reduce the CGT tax bill where a private home has also had a period of being let.

From 6 April 2020, the final period exemption is reduced from 18 months to 9 months and in most cases the Lettings Relief goes altogether.

This means that there is the potential to be charged tax on an additional £40,000 on a let property sale which takes place after 5 April 2020 rather than before, plus an additional 9 months of time apportioned gain.

So, if you are considering selling a rental property which partly qualifies for Private Residence Relief, you may want to do it sooner rather than later.

It is worth noting that for CGT purposes the date of sale is generally the date when contracts are exchanged not the date that the sale is completed.

Overseas matters

If you are non-resident or temporary non-resident, the sale of a residential property needs to be reported on a non-resident Capital Gains Tax return within 30 days of the property being conveyed. Late returns will incur late filing penalties. Please note this is in addition to reporting the disposal on your annual self-assessment tax return. The online non-resident form for reporting the disposal of UK residential property is very complicated and if you find yourself in the position of needing to file one, you will probably need specialist advice.

Safe locked for 40 years opened on first try

Last opened in the late ‘70s, the large safe located at Alberta’s Vermilion Heritage Museum had always posed a challenge to visitors, with thousands trying to crack the code and gain access to what was inside.

Taken from a local hotel, the contents of safe remained a mystery to guests, as well as staff, who hadn’t managed to crack the code.

However, last month Canadian Stephen Mills walked up to the large 2,000lb metal safe and cracked it on his first try.

Mr Mills was being shown around the museum by guide Tom Kibblewhite, who explained it’s history and the many attempts that had failed before, but he decided to have a go at opening it “for a laugh”.

Seeing that the safe’s combination dial ranged between zero and 60, Mr Mills thought that 20-40-60 might be a good bet and to his surprise, the door of the safe opened.

He said: “I cracked it, it opened, and it was just total disbelief. Tom was equally surprised; the whole family was. It was great. The kids got excited, they were like ‘we beat it, we beat the code!’

“I could tell it wasn’t opened for a long time because some dust fell out from the locking mechanism.”

Prior to Mr Mills attempts, museum staff had tried default combinations and even asked experts to try to crack the code. They also contacted former hotel employees to see if they could help, but to no avail.

So, what was in the mystery safe? Unfortunately, not the riches that everyone had hoped for. Instead, it contained an old pay sheet and part of a restaurant order pad dating from the late 1970s, which listed a mushroom burger for C$1.50 (59p) and a package of cigarettes for C$1.00 (40p).

Please note that due to the impending holiday commitments, our offices will be closed on Monday 10th June.

We will be open for business as usual on all other dates.

We thank you in advance for your understanding.

A new campaign has been launched to permanently scrap the plans for the new off-payroll tax rules and to launch a review of the IR35 legislation.

Industry members have launched the  Stop The Off-Payroll Tax campaign that will aim to prevent the new rules for the private sector going ahead next year.

Instead, it will ask for a review of the current legislation, in order to work out how to recognise contracting fairly within the tax system.

The Government intends to include the new IR35 legislation in this year’s Finance Bill, which will be brought before Parliament in November.

With some support already from MPs, including Ged Killen MP, who held a debate on this issue a few weeks ago, has now tabled an Early Day Motion (EDM 2379), the campaign leaders are calling on contractors to canvass their local MP to see if they can help.

The best way of getting the message across to your MP is to go and see them in person, so if you write first about the damage The Off-Payroll Tax will do, and ask them to sign EDM #2379, and include that you would like a meeting with them in person.

As an industry likely to be severely impacted by these changes, now is the last time to have your say, so why not take part in this campaign to apply pressure on the Government: https://www.contractorcalculator.co.uk/stoptheoffpayrolltax

The Association of Recruitment Consultancies (ARC) has described the proposed extension of the public sector IR35 rules to the private sector as a stealth tax which could have significant economic implications.

The Chairman of ARC, Adrian Marlowe, said that while the consultation on the new rules clearly states that IR35 is not a new tax, the way it is being delivered is tantamount to a new form of taxation.

ARC recognises that the Government needs to seek ways of reducing tax avoidance via disguised remuneration but they feel that the new rules for the private sector go far beyond the origins of the IR35 rules, in a move it describes as a “sleight of hand” that attempts to “disguise the reality”.

“Firstly, the five per cent top slice expenses allowance for contractors and arrangements to which the old IR35 rules apply are now to be taxed. This proposal is not a simple scrapping of the allowance, in other words, an adjustment to existing tax rules, because private sector contractors working for small businesses are to retain the five per cent allowance. It is a new charge on the five per cent top slice,” explained Adrian Marlowe.

“Secondly, the imposition of payment of employer’s NICs on the ‘Fee Payer’, being the new deemed employer liable to account for the payments, usually the hirer, did not previously exist under Chapter 8 of the IR35 Rules. It is entirely new.

“Thirdly, the amount of employer NICs, employee NICs and PAYE will now be calculated on the gross sum of the contractor’s invoice for work charged. This is also new as PAYE and NICs due from a contractor’s company under Chapter 8 would be calculated on the net sums, always less than the full invoice sum, even if you don’t take into account the five per cent top slice allowance.”

ARC has indicated that as a result of this, HM Revenue & Customs (HMRC) will receive a significant uplift of PAYE and NICs from liable parties over and above the amounts that HMRC could have expected under Chapter 8.

Under the proposed legislation, which is due to come into force in April 2020, payments will be classed as being in respect of a deemed employment, thus adding the charge to payroll.

ARC says that this will create a new tax, which also has the effect of requiring an additional new payment of apprenticeship levy on the invoice for work charged for those who are mandated to make payments.

ARC added: “For all the reasons mentioned the premise of the consultation, that it is merely a means of enforcing Chapter 8, is entirely incorrect and regrettably misleading. The government should revisit the entire proposal.”

Loose Women star, Kaye Adams, is the second star to have beaten HM Revenue & Customs (HMRC) in a dispute over the IR35 rules following the case of Lorraine Kelly.

The HMRC investigation into Adams’ limited company, Atholl House Productions, focused on her work at the BBC.

At a hearing in London in March, the Tribunal set about the task of determining whether the rules for off-payroll working should apply for the two tax years ending 05 April 2016 and 05 April 2017.

HMRC claimed that Adams was a BBC employee and not a freelancer and so should be taxed under the IR35 regime. Adam’s brought the appeal against a PAYE tax bill of £81,000 and another £43,000 for national insurance contributions during this period, which lasted between March 2015 and March 2017. During this time, she had presented The Kaye Adams Show on the BBC, but also worked for other broadcasters such as Sky and ITV.

During the hearing, the Tribunal referred to Hall v Lorimer which stressed the importance of conspiring the whole picture.

It said: “In order to determine whether a person carries on business on their own account, it is necessary to consider many different aspects of that person’s work activity.

“This is not a mechanical exercise of running through items on a checklist to see whether they are present in, or absent from, a given situation. The object of the exercise is to paint a picture from the accumulation of detail…”

In doing so the Tribunal appears to have questioned the process by which HMRC came to it‘s decision on whether IR35 should apply and it‘s CEST tool, which is designed to act as a checklist for employers.

The Tribunal found that while the BBC did have some element of control, she was in business of her own account and that despite her commitment the BBC did not have ‘first call’ on her time and her role was distinctive from other BBC staff.

Evidence given by M. Paterson, who was editor in charge of the Kaye Adams Programme, stated that she was “very much a broadcaster in her own right, given that she works for others, she isn’t BBC’s Kaye Adams, she is a journalist who happens to work for us.”

Judge Tony Beare did however back the BBC in deeming her substitution clause in her 2016/2017 contracts as meaningless.

He said she “did not in any meaningful sense provide her own equipment”; she “ran no financial risk” and Mutuality of Obligation existed.

However, these three arguments put forward in favour of HMRC’s case, highlighted just how strongly in business on her account Adams was, according to the judge.

He said: “Those two tax years of assessment need to be considered in the round, in the context of Ms Adams’s professional career as a whole.

“This is because Ms Adams’s engagement with the BBC did not occur in isolation. Instead, it was just part of her overall professional career…as an independent provider of services.”

This decision, along with the previous defeats for HMRC, could play a key role in future tribunal cases for other contractors once the IR35 regulations are extended to the private sector next year.

New data has revealed that the number of tax disputes launched through the courts against HM Revenue & Customs (HMRC) has risen by around 43 per cent in the last two year.

According to official figures, the number of cases dealt with by the First Tier Tribunal in 2015/16 was 5,161.

However, in 2017/18 this figure rose to 7,377 and in the 2016/17 tax year there were also 6,559 cases, which means that in the last year alone the number of cases has also risen by 12 per cent.

It is thought that the sudden rise in cases has been driven by the more aggressive tactics of the tax authority and it‘s access to new data using the latest technology, which has led to more cases being investigated in the first place.

The implementation of HMRC’s Connect system in 2010 is thought to have had a considerable impact, as it has made the process for investigating tax affairs far cheaper.

The system also facilitates, what it thought to be HMRC’s main area of focus, which is reducing tax losses resulting from undeclared income or gains arising offshore.

HMRC has been aided in this thanks to greater collaboration and data sharing between nations and organisations.

Another key target for HMRC’s software and enforcement action in recent years has been small businesses and sole traders, who typically have less access to effective tax advice and are therefore easier targets.

In light of this rise, taxpayers are being encourage to seek additional support as and when they require it.

A new survey has found that many contractors are shunning pension savings as the country sees a 12 per cent rise in traders who are failing to save for retirement.

Of the 1,000 self-employed people interviewed, around two-thirds of the respondents admitted that they avoided paying into a personal pension scheme.

If this number is extrapolated nationally, it could mean that as many as 2.9 million of the UK’s 4.5 million contractors may not be saving for retirement.

It is thought that the uncertainty around self-employed work and the risk of extended periods of time between contracts is the main reason why many contractors do not want to tie their money up in a pension that they cannot access tax-free until the age of 55.

Last year, the Taylor Review which looked at zero-hour contracts and self-employed workers, identified this as an issue and suggested several recommendations, but these have not made it into the Government’s current Good Work Plan.

The survey also found that workers aged between 31 and 40 are the least likely to be paying into a pension scheme, with just 44 per cent currently contributing to one.

In comparison, nearly 60 per cent of 41-50-year-olds were making savings into a defined contribution scheme.

Unsurprisingly, due to this lack of saving, almost 59 per cent of freelancers expect to continue working past the age of 64.

We have developed a close relationship with M & N Insurance so that you can draw on their experience and expertise to meet all of your pension requirements.

Please contact Jeremy De Lord on 020 8952 2234 for further details. You may receive preferential rates from M & N Insurance if you are a client of Cogent.