No fines for IR35 errors in first year of tax changes, government says
Posted on 28th February 2020 at 09:58
The government has published its review into the upcoming private sector off-payroll working rules after announcing it would look into the changes following widespread concern from businesses and contractors alike.
Unsurprisingly, HMRC has announced that it will push ahead with the controversial IR35 legislation reforms to the disappointment of contractors and businesses alike who hoped the change to the rules would be delayed or scrapped entirely.
The document states that "while there remains some opposition to this change, the Government believes it is right to address the fundamental unfairness of the non-compliance with the existing rules. The reform will therefore go ahead on 6 April 2020."
So what’s the latest?
“Customers will not have to pay penalties for errors relating to off-payroll in the first year, except in cases of deliberate non-compliance”, the document says. This has been decided in a move to address concerns and support the smooth and successful implementation of the reform.
This will come as a very, very minor relief for businesses after HMRC was urged to take a softer approach on compliance in the first year of reform. However, it's important to note that in cases of deliberate non-compliance, penalties will still apply.
Concerns over the accuracy of the CEST (Check Employment Status for Tax) tool seem to have been brushed over, and a baffling statement on page 10 of the document states that "Since the enhanced CEST service was launched in November, CEST has been used over 230,000 times, and user feedback has been largely positive."
Dave Chaplin, Founder and CEO at ContractorCalculator, called the review a "whitewash report" and expressed his disappointment that "there is no reference at all to the outright blanket banning of contractors" in a series of LinkedIn posts made yesterday.
Chief Executive of Qdos Contractor Seb Maley, said that "the government has clearly ignored calls for a genuine review into IR35 reform, with the findings suggesting they were simply paying lip service to appease critics. [...] Issues around the CEST tool, HMRC's level of support, and ways contractors can contest unfair IR35 decisions still stand. With IR35 reform only a month away, the response from government is very disappointing, albeit unsurprising."
You can read the full review here.
And in other news...
Much loved TV star and host of ITV's This Morning Eamonn Holmes could face up to £250,000 in fines to the taxman after losingan IR35 case at a tax tribunal earlier this week. The ruling was largely based on on mutuality of obligation (MOO) tests, which meant Tribunal Judge Harriet Morgan dismissed Holmes’ appeal. She decided that IR35 applied to the arrangements in place in each relevant tax year.
Dave Chaplin has unsurprisingly spoken out against the ruling, saying "This is not a case of tax avoidance, and not the kind of situation which the IR35 legislation was brought in to combat, 20 years ago. In my view, neither Holmes nor ITV share any blame here – the fault lies with an unworkable piece of legislation that no one properly understands."
Get your IR35 Private Sector: 5-Step Action Pack now!
Now that we're certain that the IR35 changes are going to go ahead as planned, you cannot afford to be left in the dark over your own employment status and potentially face thousands of pounds worth of fines.
Nicola and the team at Effective Accounting have been preparing for this for close to a year. We are fully prepared to work with contractors to help you to understand the changes, navigate the complex world of IR35 and in your communications with your client.
Make sure you're one step ahead and get your IR35 Private Sector: 5-Step Action Pack now. Learn more here.
For just £297 + VAT, you will get:
Full written IR35 Contract Review;
30-minute debrief call with Nicola to discuss the outcome of the IR35 Contract Review and its impact on you and your limited company;
Communications Pack including email and letter templates to send to your client to get your communications started, and in the event that you need to appeal;
30-minute call to discuss your very own action plan.
Be proactive, take the initiative and get planning for April 2020!
Nicola J Sorrell
- Effective Accounting
Founder | Xero Champion | IR35 Expert
Tagged as: IR35
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