Find out the steps ACCA is taking to represent practitioners with regards to HMRC's off-payroll working/IR35 proposals.
The Finance Bill arrived in late July and as expected contained a number of previously announced policies.
As you will be aware ACCA is concerned about the off-payroll working/IR35 proposals and HMRC having its preferred creditor status reintroduced.
We have previously and continue to survey members who both hire and act as off-payroll workers to find out how they would change their practices with the off-payroll working new rules.
Notably 96% of contractors said they may have to respond by increasing their fees and those engaging them said there would be a ‘reduction in flexibility for the client’ wanting to invest in short-term projects. The IR35 rule changes will require the private sector to implement public sector rules in relation to the contract employment market.
ACCA believes a sound UK tax system requires certainty, simplicity and stability. The off-payroll working proposals do not provide these qualities, and the change comes at the worst possible time for the UK.
We stated that:
‘It provides uncertainty, as employers will effectively be unable to budget or plan for their future actions. The change will result in many large companies having to rewrite complex payroll systems to incorporate the new legislation, and is likely to significantly impact the IT sector and extend further to the multinational companies engaging in their services.
‘Workers potentially affected form the bedrock of sound financial, business management, technological and cyber security advice that enables the production of world leading goods and services that set the UK ahead.
‘We urge the government to delay introduction of IR35 changes until 2021, to allow a full appraisal of the proposed rules and consider the best way forward.’
Also contained within the Bill is a proposal that HMRC preferential creditor status is reinstated. Protecting your taxes in insolvency (see the April issue of Accounting and Business) set out the government’s intention to make HMRC a secondary preferential creditor for certain tax debts paid by employees and customers on the insolvency of a business. It includes deductions made under PAYE (including student loan repayments), NIC (employee contributions only), CIS and VAT that have been deducted and are due to HMRC at the commencement of the insolvency.
HMRC has been clear that for ‘all formal insolvencies that commence after 6 April 2020, HMRC will move up the creditor hierarchy for the distribution of assets’ and ‘will become a secondary preferential creditor for the specific taxes paid to a business by employees and customers, and any interest or penalties arising from such debts’ in England, Wales and Scotland. This ‘means HMRC will move ahead of holders of floating charges (mainly financial institutions) and other non-preferential unsecured creditors, but remain below holders of fixed charges (also primarily financial institutions) and higher-ranking preferential creditors.’
