FCSA Proposes an Alternative to the Burdensome IR35 Aug 16, 2018Views: 191
The government’s consultation regarding extension of IR35 rules to the private sector is about to close. In order to ensure fair and transparent IR35 compliance, the Freelancer and Contractor Services Association (FCSA) has proposed a novel alternative to the controversial off-payroll working reform.
The ‘Enhanced Reporting and Enforcement’ strategy introduced by the trade association body of umbrella companies improve compliance by requiring the private sector personal service companies (PSCs), mediators, and fee-payers to divulge information within the supply chain. Moreover, the end-client is required to take actions to secure their personnel supply chain network. They should submit quarterly information reports to HM Revenue & Customs (HMRC) and the data from the report will help the tax agency to take compliance actions.
In short, the FCSA’s proposed solution would allow responsible actions by the PSCs in the private sector. The solution will allow PSCs to take actions with a duty for reasonable care.
Julia Kermode, CEO of FCSA, said that the new proposal would empower end clients and PSCs to ensure compliance. The strategy would also make compliance with the tax rules commercially advantageous for the supply chain intermediaries.
Probably the best thing about the FCSA’s strategy is that it entails far less administrative costs as compared to the IR35. This is because it’s common among the compliant businesses within the presume supply chain to carry on regular audits. Also, they already maintain a list of preferred suppliers depending on the compliance ratings.
FCSA Debunks HMRC Estimates
The response by FCSA has also debunked estimates by HMRC that non-compliance in the private sector to IR35 will cost the Exchequer £1.2 billion by 2022-23. Moreover, the trade body has also exposed falsehood in HMRC’s claim that about contractors that provide services through the PSCs have equivalent status to employees.
According to FCSA’s CEO, the £1.2 billion estimate was based on the Fiscal Risks Report of Office for Budget Responsibility (OBR). The OBR had cautioned that the estimated risks could be in both directions, which implies that the HMRC’s claim is exaggerated.
Kermode had stated that the HMRC and the HM Treasury had used inflated figures in support of the IR35 legislation. The reality is that the IR35 reforms had been a failure that had driven up the cost of non-compliance. The tax rules have aggressively targeted contract workers and unfairly pinning them inside the IR35 thereby causing financial misery. The counter proposal by FCSA takes a more balanced approach to IR35 compliance throughout the supply chain resulting in fair assessments.
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