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  • Off-Payroll IR35 Reforms to Private Sector in April 2020 Oct 30, 2018

    Hundreds of thousands of private-sector contractors face higher tax and National Insurance (NI) bills from April 2020.

    The chancellor announced that tighter tax rules for those working in the public sector will be extended to those working for private firms.

    The rules, known as IR35, are designed to hit those deemed by HM Revenue and Customs (HMRC) to be employees.

    Among those affected will be IT contractors, engineers, Doctors, Nurses and consultants.

    The crackdown is the biggest revenue-raising measure in this year’s Budget.

    Critics accused the chancellor of hurting thousands of people who are self-employed, and burdening businesses too.

    But the Treasury insisted that the reforms would not affect anyone who was genuinely self-employed.

    How will the new rules work?
    For IR35 to apply, you have to work through your own company for another business.

    If the way you work is similar to an employee of that business, you should pay income tax, and National Insurance (NI) at the 12% rate.

    Up to now many contractors in personal service companies have been paying less tax and NI.

    But from April 2020, larger businesses – like banks – will take on responsibility for deciding which contractors will need to pay more tax and NI.

    The rule change will not apply to the smallest 1.5 million businesses.

    If someone is deemed to be an employee, the firm using the contractor will also have to pay NI for the first time.

    If classified as an employee for tax purposes, they would have to pay income tax, and NI at 12% on the money paid for their work. However they may not have other employee rights, like maternity leave.

    The Treasury estimates that the changes will bring in an extra £2.9bn by 2024.

    When similar changes were brought in to the public sector last year, HMRC raised an extra £550m in tax and NI.

    The Association of Independent Professionals and the Self-Employed (IPSE) accused the chancellor of putting the self-employed in a “holding pattern of despair.”

    “The government’s smash-and-grab mentality will therefore punish the overwhelming majority of genuinely self-employed people, heap a massive administrative burden onto businesses at a time of Brexit uncertainty, and also undermine one of the UK’s most dynamic and productive sectors,” said Chris Bryce, IPSE’s chief executive.
  • Contractors Reveal Strategies to Prepare for The IR35 Private Sector Reform Oct 29, 2018

    The Government will most likely announce the private sector IR35 reform in the Budget 2018 in a few days. While the Government has not made any hints about the announcement, the 2 million UK contractors and thousands of businesses that offer service to the sector are bracing themselves for the worst.

    Contractors are understandably feeling the pressure due to the rumours surrounding IR35 reform. The Government’s false promises in the recent past for the independent workforce has already created as a sense of dismay among the sector.

    According to a survey by Qdos Contractor, only 14 percent of professionals opine that the IR35 reform will not be announced in the next budget. Around 86 percent of contractors think that the changes are highly likely.

    Business Community Frustrated by Unmoved Stance of the Government
    The Government has always said that the private sector IR35 reform is being considered without giving a definite answer. Mel Stride, the Financial Secretary to the Treasury, has remained tight lipped about the likelihood of having 5.7 million private sector companies determine the employment status of contractors.

    The seemingly unmovable stance by Treasury officials and MPs has left the business community confused and frustrated. In case the IR35 reform is extended in the private sector, most contractors are not confident that they will be assessed in a fair manner. The possibility of blanket determinations will result in many contractors unfairly being judged inside IR35.

    Still, contractors are prepared for the possibility of a private sector reform being enforced sooner rather than later. A recent survey carried out by Qdos Contractor have shed light on some of the strategies that they will use to manage the off-payroll working rules when introduced.

    About 32 percent of contractors have stated that if they are caught inside IR35, they would end the contract arrangement to avoid paying higher taxes.

    Moreover, around 30 percent of contractors had stated that they would increase the rates to account for the likelihood of being deemed inside the IR24. This could result in increased cost pressure for private sector companies.

    Nearly 21 percent of contractors have stated that they would have their contract reviewed to ensure that they are outside IR35. Lastly, around 17 percent of contractors have started considering other options such as forming their own small business companies in partnership with other contractors or even moving overseas. With millions of contractors associated with the private sector, the impact of these actions on the economy would be great.
  • HMRC Wins 79 Million Pounds Tax Avoidance Case Oct 26, 2018

    The HM Revenue and Customs (HMRC) have recently won a major tax avoidance case against two US companies: Cargill and Goldman Sachs. The UK Court of Appeal have ordered the companies to pay back £74 million to the tax agency for taking part in a tax avoidance scheme.

    The case involves a company GDF Suez Teeside Ltd. owned by Cargill and Goldman Sachs. Following the collapse of Enron in 2001, Cargill and Goldman Sachs had purchased the company that was previously known as Teeside Power Ltd.

    Cargill and Goldman Sachs were found guilty of avoiding UK corporation tax on millions owed from Enron’s subsidiaries. They had set up another company in 2006 and converted the money owed into shares. This scheme was devised by Ernest & Young that was the firm’s auditor at the time.

    The case went through both the First Tier and Upper Tier Tribunal. The Court of Appeal had recently ruled in favour of HMRC ordering the firms to pay pending taxes to the UK tax agency.

    HMRC Emboldened After the Court Victory
    After the decision made by the Court of Appeal, the director of Customer Compliance at HMRC made the statement that anyone who tries to gain an unfair tax advantage by exploiting the tax rules will fail. The company has dedicated expert professionals to address abuses of tax rules.

    The managing partner of Milestone International Tax, Mr. Miles Dean has stated that this is how the tax disputes need to be settled in courts. The UK court system ensures that every case will be dealt equitably. The win rate of HMRC seems to be increasing, according to Mr. Dean. This is most probably due to a purposive approach that is now taken by the courts in evaluating tax avoidance cases.

    Having said that, most cases involving HMRC end up badly for the tax agency. The reason for this is the aggressive stance taken by the tax body regarding IR35 reform. The fact is that the reform is highly flawed that causes great injustice to contractors. End users don’t always make correct judgements regarding contractors’ employment status. This has resulted in a lot of unfair judgements made against the contractors resulting in great financial difficulties.

    While HMRC has deservedly won the million-pound case against the two US firms, it does not in any way strengthens its other cases. On the contrary, it shows that the past judgements against HMRC involving IR35 employment status were just and equitable due to the unbiased nature of the UK justice system.
  • Qdos Issue IR35 Advice Ahead of the Budget 2018 Oct 25, 2018

    IR35 specialist Qdos Contractor have issued extensive practical advice for self-employed individuals, employment agencies, engagers, and end users about a week before the expected Budget 2018.

    The advisory firm has stated that private sector businesses and contractors should prepare for the expected extension of IR35 to the sector.

    Workers whose work fall inside the IR35 will be required to pay national insurance contributions (NICs) and PAYE. Those whose work falls outside IR35 should receive relevant and consistent information about any internal changes made by the engager that can have an impact on the rules. Keeping workers informed is critical so that they don’t abandon their work and walk out due to perceived injustice.

    Seb Maley, chief executive at Qdos, had advised the end clients that irrespective of whether the IR35 extension is announced in 2019 or 2020, they should prepare for its implementation. Early preparation will help in successfully meeting the requirement of IR35. This will ensure that firms avoid costly fines from HMRC for not complying with the legislative requirements.

    Advise to Engagers, Agencies, End Users, and Contractors
    The firm has advised engagers to train internal staff on how to assess status and relay required information to the agency.

    Agencies have been encouraged to review existing systems to ensure that correct inside/outside IR35 payments are made. Qdos have advised them to establish a clear communication channel with engagers and keep a record of any payments to contractors. Also, they should use the Check for Employment Status Tool (CEST) to check the status of employees. While the tools should not be solely relied upon to know about IR35 status, it will give an idea of what results to expect.

    End users have been advised to review each engagement on merit and avoid any shortcuts such as blanket assessments. Some of the advice given to agencies overlap with the advice to end users. This is because the IR35 framework also has certain overlaps. The income will be deducted at the source which means that the responsibility to make payments will fall either on the recruitment agency or the end client business.

    Contractors are advised to voice their opinions, encourage agency and end client to contact an independent IR35 advisory firm. The independent advisory firm will be in a position to give honest unbiased advice regarding the employment status.
  • Budget 2018 Regarded as a ‘Make or Break’ Point for Chancellor Oct 24, 2018

    Experts say that Philip Hammond’s Budget 2018 that will be announced next week will have far-reaching impact on public opinion about the Tories. The Federation of Small Businesses (FSB) has urged the chancellor to ensure that the budget is pro-business so that it has a positive impact on the economy.

    According to FSB’s Mike Cherry, the chancellor has used warm words for businesses in the past such as his statement this month that Torie’s will be ‘the party of the business. He must now make true his words in the Budget 2018.

    The chancellor has now the opportunity to show whether he really does favour interests of businesses. This will also allow him to make amends with the self-employed community after he had caused an uproar by deciding to end Class II National Insurance Contributions (NICs). The decision had robbed the self-employed whose annual income was above £6,205 of critical benefits such as the State Pension.

    Many contractors who work through their Personal Service Companies (PSCs) have shown pessimism regarding the Budget 2018. They expect additional taxes particularly in the form of IR35 reform.

    The new chair of the Treasury Select Committee, Nicky Morgen, has suggested that some firms will feel that the Government has played a game with them. The Torie MP has admitted that the party traditionally been regarded as pro-business has created a lot of uncertainty for the sector.

    Torie seems to have taken a U-turn when it comes to supporting the business community. One Torie MP had stated ‘F**ck Business’ when asked about UK firms’ Brexit concerns. Mr. Morgan admitted that he was deeply annoyed at the statement and that it’s tot tally unforgivable for a party that should be supporting wealth creators and entrepreneurs.

    Tories Last Chance for Redemption
    With the ominous cloud of the Budget 2018 approaching, the chancellor has a chance to redeem his party’s position. By making the budget pro-business he can be able to get a buy-in from one of the biggest supporters of the party — the businessmen.

    In case the chancellor goes against the wishes of the business community, the voters could punish his party in the next election.

    According to Sunday Times, Ian Howie, if the chancellor decides that the Government needs more money than the public, he should better brace himself to face the music from his shadow chancellor Ed Balls. The public won’t accept anything less than a pro-business Budget next week.
  • Stakeholders Urged to Plan Now for IR35 Private Sector Extension Oct 23, 2018

    Adrian Marlow, an employment law expert in the UK, has responded to reports from the BBC that the Treasury is planning IR35 private sector extension by advising contractors, private sector employers, and the recruiting agencies to prepare for the inevitable.

    The IR35 reform in the public sector has resulted in a number of contractors switching from their own limited companies to umbrella companies. A lot of them have altogether left the public sector after receiving an inside IR35 assessment instead of paying higher taxes. And this is understandable since they receive no employment benefit whatsoever similar to regular employees.

    Many contractors have decided to choose umbrella companies since they pay strategically benefits to them in exchange for national insurance (NI) and tax contributions.

    While some experts predict that the reform will likely come in April 2020, many believe that the Government will bring the reform as early as in six months. The Government has clarified its position that IR35 reform is important as it targets contractors who engage in shady employment tactics to avoid taxes.

    Meanwhile, the Treasury maintains that the public sector IR35 reform has resulted in an increase in tax revenues. This conclusion, however, is severely disputed by contracting professional bodies that claim that the figures are largely misleading. The stats don’t take into account the increase in non-compliance due to enforcement of the off-payroll working rules.

    A number of professionals who represent the skilled contractors have urged the Government not to go on with the decision to extend IR35 to the private sector. However, it is likely that their concerns will be ignored in the Budget that is expected to be announced at the end of this month.

    Proactive Approach is Necessary to Avoid Problems
    According to Mr. Marlow who is associated with the Association of Recruitment Consultancies (ARC), IR35 reform and the Check for Employment Status Tax (CEST) tool should be brought before the Treasury Select Committee. But this is not likely to happen since HM Revenue and Customs (HMRC) and the Government are in concordance regarding the effectiveness of IR35 even though facts point to the contrary.

    Mr. Marlow therefore advises stakeholders to prepare for inevitability and take proactive steps regarding the IR35 reform. He says that the extension will likely result in a shift of private sector contractors to umbrella companies. This will likely result in agency worker regulations (AWR) claims and tax risks for which stakeholders should remain prepared.
  • HMRC Has Started a “Witch Hunt” Against Tax-Evading Contractors Oct 22, 2018

    A letter leaked to the public-sector bodies (PSBs) suggests that HM Revenue and Customs (HMRC) has started a ‘witch hunt’ against contractors who work through their own limited companies.

    According to Dave Chaplin, the CEO of ContractorCalculator, this seems to be an ominous sign that indicates that HMRC is pressed on pursuing the few who have managed to remain outside the IR35 tax treatment despite working as an off-payroll worker.

    Details of HMRC Letter to Contractors
    The letter posted to PSBs by HMRC has requested to divulge details of names and addresses of contractors who have offered services through their own companies as part of the compliance check for IR35 taxation rules.

    The letter requests that the PSBs provide exact contact detail of each of the engagement including a brief description of the type of services provided through PSCs.

    HMRC has also requested that PSBs provide details about contractors who had previously traded through their limited company but later entered into a contract or associated themselves with an umbrella company.

    From the letter, it’s clear that the tax body seems intent on assessing employment status based on the false and misleading information. While it maintains that the CEST tool only serves as an advisory tool, it has asked the PSBs in the letter whether the tool has been used in assessing contractors.

    Due to the widely accepted view that CEST does not accurately determine employment status, HMRC has publicly denied that the employment assessment tool has any legal authority. But at the same time, the content of the letter suggests that the tax body is promoting the use of the tool for determining employment status.

    According to Mr. Chaplin, contractors who have created a paper trail that proves that their work is outside the off-payroll working rules should not have to worry about anything. That said, the approach that HMRC has adopted after the introduction of IR35 last year, contractors need to be prepared for any inevitability.

    The intention of HMRC has been made clear from the leaked letter. The tax authority is doing everything in its power to squeeze every penny from poor contractors. The immature and highly criticised actions of the tax have forced many contractors to leave the public sector to avoid being a victim of its witch hunt. Only time will tell what havoc IR35 extension to the private sector will create once it’s implemented next year.
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  • Planned Private Sector IR35 Reform Grilled by Contracting and Recruitment Agencies Oct 20, 2018

    The Chancellor’s planned extension of the controversial IR35 reform in the private sector has received further criticism from contracting and recruitment agencies.

    The rushed introduction of IR35 reform in the public sector has been strongly criticised by experts in the UK. The haphazard and unsystematic manner in which the reform has been introduced has resulted in widespread confusion. Many public-sector companies had imposed blanked IR35 determinations due to which a lot of contractors had found themselves wrongly inside the off-payroll working rules.

    The unfair employment determination had caused financial problems for the public-sector companies. Many public-sector contractors had decided to leave the public sector resulting in a serious shortage of skilled labour. As a result, many important projects had been delayed causing loss of money to public companies.

    One report published in the BBC had quoted that HM Revenue and Customs (HMRC) believes that tax evasion practices in the public sector would result in unpaid taxes of £1.2 billion by 2023. However, the estimations are largely misleading that is not backed by any evidence.

    Strong Criticism regarding IR35 Reform
    In the Government’s recent IR35 consultation, the off-payroll working rules have been strongly criticised by contracting and recruitment agencies, taxation advisory firms, and accounting agencies. The experts had urged the Government to take great caution and iron out the irregularities before implementing IR35 in the private sector.

    HMRC has been blamed by experts in failing to consider the consultation responses that it has received regarding IR35. According to Ms. Julia Kermode, the CEO of FCSA that represents freelancers and self-employed individual, the policymakers have relied on false figures without proper consideration. They have not considered the devastating impact the IR35 rules will have when extended to the private sector.

    Andy Chamberlain, the Deputy Director of Policy at IPSE that also represents contracting professionals have accused the Government of aiming the gun against the self-employed individuals and creating short-sightedpolicies that could cause great damage to the UK economy.

    Furthermore, the General Counsel of a recruitment agency the Association of Professional Staffing Companies (APSCo) had urged the Government to delay reform implementation for at least twelve months. This is necessary to give sufficient time to businesses in the private sector to make the required preparation for implementation of IR35 reform requirements. Moreover, this will also give time to the Government to fix inaccuracies regarding the HMRC’s CEST employment status verification tool.
  • HMRC Receives Another Blow Regarding Its CEST Tool Oct 19, 2018

    HM Revenue and Customs (HMRC) has experienced another blow as a tribunal judge has ruled against the IR35 determination of its Check and Employment Stats for Tax (CEST) tool. The judge has rejected the tool’s assessment that had wrongly put a contractor professional inside the IR35.

    Tony Elbourn had entered into a contract with the Met Office as a business analyst. He had offered services as a business analyst between the months of August 2017 and January 2018 through a recruitment agency named Qualserve Consulting Ltd.

    The CEST tool had deemed Mr. Elbourn as being inside the IR35 due to which tax and national insurance were deducted from his wages.

    However, Judge O’Rourke hasgiven the verdict that Mr. Elbourn’s work falls into the category of self-employment. He was neither a worker nor an employee as judged by the CEST tool.

    HMRC had employed strange defence tactics during the case. It had alleged that Mr. Elbourn was not an actual employee but a ‘deemed employee’. This, in fact, implies that he was self-employed, which eventually led the case outcome to be in his favour.

    According to the presiding judge, Mr. Elbourn was his own master with regards to the assigned project. Apart from the weekly meeting, he did not have to conform to the company’s policies.

    Judge’s Verdict A Severe Blow to HMRC
    Dave Chaplin the CEO and founder of ContractorCalculator has stated that the ruling against HMRC’s tool represented a ‘hammer blow’ that has questioned the validity of the CEST tool.

    Mr. Chaplin predicts that there will be many more similar cases in the coming months.The case outcome will encourage contractors facing similar predicaments due to being wrongly judged inside the IR35 by the CEST tool. The outcome against HMRC adds to the growing evidence that the CEST tool is inaccurate in determining employment outcome and therefore should be withdrawn.

    The judgement against HMRC comes weeks before the announcement of the Government’s Budget. Mr. Chaplin says that this court case may force the Government to reconsider its plan for premature extension of IR35 to the private sector.

    The Government should focus on more important matters such as the aftermath of the Brexit. It should not go ahead with plans that will further deteriorate the market. Extending IR35 to the private sector will have unexpected results. It could put the economy in a recession as the private businesses will likely face skill shortages or increased costs due to employing full-time specialized staff.
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  • Plans of Early Roll Out of IR35 Reform Criticised Oct 18, 2018

    Contractor groups have opposed any plans by the Treasury for early rollout of IR35 reform in the private sector. The controversial IR35 extension to the public sector is expected to be announced in the next budget that is expected to take place on 29 October 2018.

    According to BBC News Economics Editor, Mr. Kamal Ahmed, the Treasury is not making any changes to extend the reforms for self-employed individuals in the private sector. He has cited estimations of the Treasury Department that more than 30 percent of contracting professionals offer services through personal service companies (PSCs) who are in fact employees paying less tax. Also, he had cited HMRC reports that IR35 reform in the public sector had resulted in an additional £410 million.

    The economics editor of BBC News had also referred to claims by the Treasury that without the stated reform in the private sector, HMRC won’t be able to collect the specified tax revenues.

    Experts Dismiss Treasury Claims as Misleading
    Dave Chaplin who is the founder and CEO of ContractorCalculator had dismissed claims of the Treasury Department stating that it was losing money due to an ideological flaw. According to Mr. Chaplin, the HMRC fails to recognise the ‘freelance premium’ that contractors charge to clients to compensate for what they would have been paid if they worked as full-time employees. This should make the IR35 invalid, but HMRC continuous to falsely blame contracting professionals in dodging taxes.

    The Deputy Director of Policy at the Association of Independent Professionals and the Self-employed (IPSE), Andy Chamberlain had agreed with the criticism of Mr. Chaplin alleging that the figures stated by the HMRC were false.

    Highlighting the remarks by the Chancellor that the Conservatives have ‘business at its core’ agenda, Mr. Chamberlain has said that the business groups have clarified that they aren’t ready for the early rollout of IR35 reform in April next year.

    In case the Chancellor decides to go ahead with the IR35 reform, he will be opposing the very businesses that he had pledged support. Mr. Chamberlain stated that instead of properly taxing large global companies, the Government is going against the contracting professionals.

    The fact is that IR35 reform is a myopic policy that falls short of reality. The reform is a short-sighted tax grab that will result in unimaginable damage to the economy in the long run.
  • HMRC Hires a Barrister to Fight IR35 Case Against ITV Presenter Eamonn Holms Oct 17, 2018

    HM Revenue and Customs (HMRC) has taken a TV presenter Eammon Holmes to court over off-payroll working rules. The outcome of the case could cost the presenter around £2 million based on reported pay.

    An IR35 expert has stated the move by HMRC as unfair and expensive. The use of a barrister by HMRC for the case will cost a lot of public money.

    Previously, HMRC has also used a lawyer in the Jensal Software Ltd. and MDCM Ltd. case only to lose that cases. The taxation agency has given various explanations for this abuse of public tax money ranging from its own legal department having been overstretched and greater chances of a victory in using an external legal professional.

    Millions at Stake in Holmes’ Case
    HMRC has assigned a barrister since millions of pounds is at stake in Mr. Holmes trial. And the implications of the win will be huge for the tax authority.

    In case HMRC wins the case against Mr. Holmes, it will have reason to go after other media celebrities who have been providing services in a similar fashion to news and TV channels. According to Mr. Holmes, if he loses, other ITV stars will be targeted next.

    In the IR35 case against Mr. Holmes as well as another pending case against TV presenter Ms. Joana Gosling of BBC, the critical deciding point will be Control.

    According to Qdos advisory, Control will be the main factor since media presenters who provide services through Personal Services Companies (PSCs) similar to the case involving Ms. Christa Ackroyd.

    The advisory has provided advice on how it should tread when investigating the ITV presenter. Seb Maley of Qdos has stated that the tax agency should learn from mistakes committed in investigating other BBC presenters. The broadcaster had encouraged workers to provide services through PSC instead of the individuals.

    Apart from encouraging, BBC presenters have used terms such as compelled, coerced, and bullied, to describe the behaviour of the British broadcaster towards them. A lot of experts including MPs have criticised the broadcaster who should have born moral or fiscal responsibility. However, the BBC had ignored addressing the criticisms.

    According to Mr. Maley, HMRC needs to go about this case in the right way. It needs to assess the unique aspects of surrounding the case of Mr. Holms and other presenters. The tax authority cannot simply make an assumption that circumstance of all contractors who have been engaged with media companies are the same. The same view was shared by the Freelancer and Contractor Services Association (FCSA) that had warned HMRC from penalising everyone who provides services through PSCs.
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  • A Leaked Webinar Suggests HMRC Misled NHS on IR35 Oct 15, 2018

    The HM Revenue and Customs (HMRC) understanding of the laws relating to IR35 have been criticised by tax advisors and legal experts. They have expressed concern that the tax agency has misled the public regarding off-pay rule legislation. The criticisms follow a leaked webinar titled ‘Working through intermediaries: implementing the IR35 guidance in the NHS” delivered by MARK Frampton, HMRC’s IR35 policy advisor in September last year.

    The hour-long webinar that was leaked to the Independent Health Professionals Association (IHPA) may help explain the reportedly large number of blanket assessments after the introduction of IR35. The practice has been described as inaccurate and misleading resulting in the undue financial suffering of the affected contractors.

    According to Martyn Valentine who is the director of employment status specialists at The Law Place, Mr. Frampton’s comment regarding employment status is a cause of great concern. The guidance has been geared towards assessing almost all NHS locums to be inside IR35.

    The guidance to NHS trusts, according to Dr. Iain Campbell who is the IHPA secretary-general, has resulted in rota gaps not being filled due to the reduction in locums in hospitals. This has worsened the winter crises and put patient care in danger.

    A legal expert at IHPA, Stephen Mhiribidi, had stated that rota gaps have been increasing daily and that most of the locoms have been slow to take shifts that involve a lot of travel, high accommodation costs,and subsistence. In fact, some of the trusts have faced risks due to this practice.

    In the webinar, Frampton has instructed the NHS trusts that the locums would be subjected to the right of supervision, control, and direction. This might have encouraged them to ignore statements raised by contractors that control does not apply to their engagement.

    According to Dr. Campbell, HMRC does not have a clear understanding of control in the healthcare sector. He says that being a doctor he knows that he is compelled to pass clinical judgements that are in the best interest of the patients and not compelled by any law. The professional codes of conduct mean that medical professionals are autonomous practitioners and are not controlled by any legislations.

    NHS Trustees were advised in the webinar that a contractor who has an assistant to complete the work in order to pass the off-pay rule substitution test. The statement clearly reflects that the HMRC does not understand the case law and has potentially misled NHRC regarding IR35 rules.
  • Important Facts About the 2018/19 UK Payslip Law Oct 12, 2018

    The UK Payslip Law that was introduced this year will become effective in just under six months. Employers need to be aware of this law to avoid facing penalties.

    The new employee payslip law that became effective on April 6, 2019 require that all workers should be provided with itemised payslips. The payslips provided to all workers including zero hours and casual workers can be in print or electronic format.

    According to the latest payslip law, each payslip should contain details of how the payment calculation has been made. The payslip should mention whether the hours and rate of pay are fixed or variable. The intent of the new payslip law is to make the payment clear to understand for the employees. In addition, the payslip law has been introduced to ensure that employees know that they are paid correctly and make a complaint in case they believe that they have been underpaid.

    Background of the UK Payslip Law
    The UK Payslip Law had been introduced after recommendation for the Low Pay Commission in 2016 and the Taylor review report. These reports have recommended that employers take measures to remove any confusion regarding the payment. The employers were required to provide workers with clear information regarding how the pay was calculated.

    The requirements of the Employment Rights Act (ERA) 1996 (Itemised Pay Statement) (Amendment) Order 2018 include improved transparency regarding payment to employees. The law is particularly relevant to workers with varied roles or working hours. It addresses the problem faced by such workers whose payment involved varying rates of pay.

    The payslip law has been introduced in light of complaints that some employers were deliberately or inadvertently paying their employees below the minimum pay. Most of the complaints related to the zero or low hour contract work.

    As per the new payslip law, the payslip should contain information as prescribed in Section 8 of the ERA 1996. Employers are required to show the following information as per this law in the employee payslips.

    • Earnings before any deductions
    • Earnings after dedications
    • Fixed deductions
    • Variable Deductions such as tax and NI contributions
    • Net wages
    If you are an employer, you should make sure that the payslip conforms to the requirements of the latest payslip rules. The payroll process should be revised if required to ensure that relevant details are included in the payslip. In case you employ a payroll firm, you should ensure that the payslip is prepared as per the exact requirements of the payslip law.
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  • IPSE Urges the Government to Review Loan Charge Oct 11, 2018

    The Association of Independent Professional and the Self-Employed (IPSE) has raised concerns about the loan charge in a letter to the Chancellor.

    The organisation that represents independent professionals has urged the government to consider the effects of the retrospective loan charge that has put a lot of pressure on the contracting professionals. The agency has urged the Government to instead focus on those who have created and profited from the Employee Benefit Trusts (EBTs).

    A lot of members had contacted IPSE regarding the loan charge. They had made use of EBTs and other similar loan schemes some years back and were facing financial problems due to the request to pay taxes on their income. The charges are significant in some cases amounting to thousands of dollars. That’s why the IPSE had written to the Chancellor Rt Hon Philip Hammond MP to reconsider the approach regarding the issue.

    While the IPSE had always discouraged its members to avail schemes that appear too good to be true, the agency has been forced to act on behalf of the members as they and their families faced grave financial difficulties.

    Many of the contractors had entered into the loan scheme years ago. They were wrongly guided by the scheme providers into signing up for the schemes. For these individuals, IPSE believes that consideration should be given to ease their problems.

    Legislative Changes Required to Bring More Clarity about Tax Laws
    The fact is that there is a clear link between shady tax avoidance schemes such as EBTs and IR35 that was introduced in 2000. The IR35 was viewed by contractors as a threat to the flexibility offered by independent work. As a result, many resulted to schemes such as EBTs that at the time were not illegal but considered to lie in the legal grey area. Now the government is demanding that the workers who were involved in the arrangement to pay back the taxes due.

    The EBTs were was touted as providing a safe harbour from a complex set of taxation rules. A lot of them were duped into signing the scheme by scrupulous through which they provided their services. They were led to believe that there was no other way and were assured that the schemes were legal.

    The IPSE believes that the Government has a duty to ease the financial burden of workers. The Government should take a long-term view and create clear and equitable tax rules. Instead of viewing workers as criminals or swindlers, they should be looked on as a productive segment of the economy. The Government has also been urged to make changes to the rules to ensure that such mistakes don’t happen again that has resulted in grave problems for the workers.
  • Conservative Government Criticised for Failing to Protect Rights of Contractors and Freelancers Oct 10, 2018

    The Association of Independent Professionals and the Self-Employed (IPSE) and the Institute for Economic Affairs (IEA) had recently organised a discussion entitled “Is the Conservative Party Still Standing Up for the Self-Employed?”at the Conservative Party Conference.

    During the panel discussion, the MP Alok Sharma who is the current Minister for Employment had been criticised for failing to protect the rights of one of the critical backbone of the economies: the freelancer and self-employed individuals.

    Mr. Sharma who is a former business had replied to the criticisms highlighting the Government’s successful efforts in reducing corporate taxes that have made UK one of the best places in the world to start a new company. But he had acknowledged that there was a need for a ‘culture change’ in order to address the problem of late payments for small businesses.

    Meanwhile, the Business Secretary Greg Clark MP had announced at the Conference that new measures will be taken to address taxation problems. The measures include appointing a non-executive director who will be in charge of overseeing timely tax payment, promoting new technologies for tax filing, and highlighting best and worst practices by trade associations.

    Government’s Commitments Criticised
    A number of panellists were doubtful of the commitment by the Government’s MP to small businesses that employ many of the country’s contracting and freelancing professionals. According to the MP Lee Rowley, there was a disconnect between the business and Conservatives. In addition, the former IT contractor and winner of The Apprentice Michelle Dewberry had stated there was an anti-business narrative within the party.

    Ms. Dewberry speaking about the gig economy had stated that this was a ‘lazy’ term used for many different types of work including high-end contract work and unskilled, precariously-engaged couriers. She had described her experience as an IT contracting professionals as ‘the bane of my life’.

    The Policy Director at IPSE, Simon McVicker had emphasised on the increasing unease among contracting and freelancing professionals. There is an apprehension among them about the next tax grab. He highlighted the outrageous IR35 reform and urged the Government to return to its roots of supporting the self-employed individuals in the UK.

    Mr. Rowley had acknowledged that the Government has to ‘tread very carefully’ and avoid over-regulating the segment. There are many young people associated with this line of work that provides greater flexibility regarding work lives. He had stated that there is a need for restructuring of the wider tax system to bring more clarity and avoid confusion.
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