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The UK government had introduced a consultation in May this year for extending the controversial IR35 reform to the private sector.
The IR35 consultation paper had proposed that private sector employers should determine employment status and deduct taxes of contract workers deemed to be inside IR35. The proposal has been highly criticized, particularly by contracting firms.
With consultation within weeks of closing, the Association of Professional Staffing Companies (APSCo) had met with the HM Treasury (HMT) and HM Revenue and Customs (HMRC) to warn about the risks of rolling out IR35 in the private sector.
The trade body that represents hiring agencies had informed HMT and HMRC about potential chaos due to hasty implementation of the reform in the private sector. Private sector companies according to APSCo should be allowed time to prepare for the roll-out of IR35.
Unrealistic IR35 Goals
At the meeting, APSCo had underlined the unreasonable expectations of the government in raising revenue through implementation of the tax rules. The trade body had stated that the concerns of the private enterprises should be addressed before introducing the IR35 reform.
APSCo emphasized that removing confusion regarding IR35 should be a priority of the public bodies. Also, the reform should be introduced in a systematic manner using a realistic timetable. The private firm should be allowed to modify their payroll processes as per the new tax requirements.
Samantha Hurley, the Director of Operations at APSCo had described the meeting with HMT and HMRC as largely positive. However, she had acknowledged that the public bodies have not shared sufficient details about the proposed tax reform. She stated that the Minister should allow private sector businesses, particularly the staffing agencies, time to adjust to the change.
APSCo seems to have given up hope that the government will retract from its decision to introduce IR35 rules. It has adopted a ‘hope for the best and prepare for the worst’ strategy in dealing with the situation.
While the agency has shared its strong concern with the public-sector bodies, it has not pushed for cancellation of the reform. Instead, the agency is hoping that the reform is implemented properly which results in minimum damage to private sector concerns. The recent meeting with HMT and HMRC shows that the thinking of the agency is now all about damage control.
Most corporations in the UK complain that the cost of tax compliance and administration has increased in the past five years. This is according to the latest report released by the British Chambers of Commerce (BCC).
The BCC found that confusion regarding the VAT rules had negatively affected businesses. Around 64 percent of companies had stated that VAT is the biggest administrative load. By reducing the threshold for VAT, a lot of businesses will fall into the burdensome remit.
Corporations in the UK also state that the present tax system is inefficient. One recent study carried out by the Chartered Institute of Personnel and Development (CIPD) and the Association of Independent Professionals and the Self-Employed (IPSE) had found that around 52 percent of hiring managers have complained of cost increases, product delays, and cancellations. Moreover, around 75 percent of hiring managers had stated difficulty in the appointment of contractors.
The reforms were a complete disaster in the public sector. It has resulted in blanket IR35 determinations without fair and detailed assessments.
Recently, the government launched a consultation for extending the controversial public-sector IR35 reform to the private sector. The IR35 reform has placed the responsibility of determining employment status on the end client.
The IR35 reform has also resulted in an increased administrative burden on the public-sector agencies. About 80 percent of hiring managers in the survey by CIPD and IPSE complained of increased workload in employing and paying contractors.
The Government’s Making Tax Digital (MTD) scheme is yet another burden on organizations. It requires self-employed individuals to keep a digital record of tax affairs, and update HM Revenue and Customs (HMRC) through the digital tax account. This will likely stymy innovation and negatively affect business growth in the UK.
An Urgent Need for Easing Compliance Requirements
The government’s well-intentioned reforms regarding VAT, IR35, and MTD scheme have a damaging effect on the local employment market. The government should ease the administrative and compliance burden faced by organizations. It needs to provide breathing space to businesses by reducing mandatory compliance requirements.
Putting pressure on companies to increase tax compliance hurts local businesses. The ill-thought-out policies make the business entangled in administrative burdens. Instead of increasing government tax revenues, the reforms will likely reduce tax revenues due to a reduced level of business revenue, caused by the burdensome compliance requirements.
The government needs to take bold steps to ease the cost of compliance. This is necessary to reduce a general feeling of passivity posed by Brexit, and prevent a potential economic meltdown.
Brewer Samuel Smith and its chairman have been fined almost £28,000 for failing to provide pension information to regulators.
The Pensions Regulator focused on the pub chain and Humphrey Smith in 2015 to make sure it was earning enough money to support its pension schemes.
Both admitted neglecting or refusing to provide information and documents.
At Brighton Magistrates’ Court on Monday, Smith, 73, was fined £8,000 and the brewery £18,750.
They were also ordered to pay a total between them of £1,240 in costs and victim surcharges.
Criminal proceedings were brought against the Tadcaster company, which was established in 1758, after it failed to meet a 26 January deadline for providing the relevant information, the regulator said.
Smith was charged because the offence by the company was committed with his consent, connivance or neglect, the pensions watchdog said.
In May, both the company and Smith pleaded guilty to neglecting or refusing to provide information and documents without a reasonable excuse under the Pensions Act 2004, the regulator said.
The company, more commonly known as Sam Smith’s, provided the necessary details several months later but criminal proceedings had already been launched, it added.
It is said to be Yorkshire’s oldest brewery and operates around 200 pubs across the UK.
In a bizarre case, the HM Revenue and Customs (HMRC) have dropped an IR35 prosecution against a contractor. The case that was highlighted by Andy Vessey — an IR35 expert at Qdos Contractor. The case involves a contractor named Gary Philpot.
Mr. Philpot who is the director of GMPFive Consulting Ltd (GMP5) had received a notification from HMRC in July 2015. The notification letter had stated that HMRC was investigating the accounts for the previous two tax years — 2013/14 and 2014/15.
HMRC had received IT services from Mr. Philpot who worked as an independent contractor. After the initial letter, a meeting took place between GMP5 and HMRC. Mr. Philpot after getting advice from Qdos Contractors’ Andy Vessey insisted that his work was outside IR35. But HMRC’s Status Inspector after consulting with three end-clients had concluded that he was caught by IR35.
Criticisms Apropos the IR35 Implementation
IR35 laws that were introduced last year in the public sector have attracted a lot of criticism. Experts have criticized the new legislation that has resulted in a lot of irregularities. It has created a financial burden on the contractors whose work is deemed to be inside IR35.
Qdos demanded an independent review to prevent the matter from going to the tribunal. The review upheld the decision and stated that the payment of £59,000 was inside IR35.
Vessey has severely criticized the reviews that are just fair accompli and a waste of time. He says that the reviewing officers generally ignore pertinent case laws. They don’t consider recent judgments of tax tribunals when making a decision. HMRC’s response to discarding the rulings is unfair. The agency does not act impartially considering IR35 cases.
The Status Inspector had tried to prevent GMP5 from pursuing the case in the tribunal. However, Qdos advised the client to push ahead with the appeal. The appeal was expected to be heard at the end of May this year. But in a surprise move, HMRC decided to close the case against Mr. Philpot.
HMRC may have acted in this manner after the Chartered Institute of Taxation (CIOT) had accused HMRC to be overzealous in pursuing IR35 cases. The chartered firm that had sent the complaint letter to the Treasury Sub-Committee stated that the tax agency purses cases even when there is little chance of a success. This may be the reason that HMRC had dropped the case acting against its own Litigation and Settlement Strategy to apply rules consistently and impartially.
Private sector businesses should start preparing for the IR35 tax reform. Specialist tax consultancy firm Qdos Contractor has advised private firms to learn from the past. They should prepare now to avoid the chaos similar to the one inflicted on the public sector by taxation rules.
The IR35 reform had raised a lot of criticisms when introduced last year in April. Experts argue that the tax reform has failed to increase tax compliance. In addition, it has also resulted in disruption in temporary hiring.
Despite assurances from the Treasury, the government will likely extend IR35 rules to the private sector. This could affect nearly 5 million independent contractors who work for the private sector.
In an online survey carried out by ContractorCalculator, most experts had opined that the reform will have unintended results. Experts had warned about the adverse effects of the IRS reform before it was even released in the public sector. Notable industries that have heavily criticized the IR35 reform include the following.
- PRISM – an umbrella company trade organization
- Freelancer and Contractor Services Association (FCSA)
- Association of Independent Professionals and the Self Employed (IPSE)
- Association of Recruitment Consultancies (ARC)
- Association of Professional Staffing Companies (APSCo)
- Recruitment and Employment Confederation (REC)
But their criticisms and advise had fallen on deaf ears. The government has intentionally disregarded and shut eyes to the warnings. It has decided to press ahead with the reform in the private sector, which will be implemented through the HM Revenues (HMRC) and the Treasury.
The government has appeared to be impervious to evidence that suggests a lot of disruption could be caused by the implementation of the reform in the private sector. In case of changes in the private sector, tax rules are implemented, it could result in a lot of inaccurate determination of independent contractors as regular employees. Also, it will place a burden on employers who will have an additional responsibility to determine the status of the contractors.
In case the chaos caused by the reform in the public sector mirrors in the private sector, it could lead to a great shortage of skilled employees in the sector. Contractors will be forced to look for work elsewhere even outside the country.
Contractors are urged to write to the MPs raising their voices against the IR35. The private sector reforms that appear highly likely cause financial hardships for contractors. That’s why it’s important to prepare for the reform now to avoid any problems later on.
The Office For Tax Simplification (OTC) Has Proposed Taxation Rules For The Gig Economy Jul 28, 2018
Gig economy has been thriving in the UK. Nearly 1.3 million workers are part of the gig economy. In the gig economy, workers get paid for each gig they perform rather than by hour or month.
A lot of UK firms are part of the gig economy including Pimlico Plumbers, Uber, Deliveroo, Addison Lee, and Ocado. A proposed legislation could force these firms to deduct taxes of self-employed workers similar to PAYE.
The Office for Tax Simplification (OTS) has asked the government to deduct taxes from gig workers’ earnings in order to meet tax obligations.
According to the OTS, the deduction of taxes will not change the tax status of the self-employed workers. They also won’t have to fill out a self-assessment tax return. This would make the tax collection process more convenient and efficient.
Director of OTS, Paul Morton, had stated that the development of the gig economy has deep consequences. New ways of working through online platforms has altered the employment landscape.
PAYE for platforms would be optional for gig firms. But those who select it will save in administration costs. In addition, they wouldn’t have to worry about getting an unexpected demand for tax at the year end.
The OTS has also suggested that HMRC should introduce an app for the self-employed. The app should help the employees manage their tax-related affairs. It should provide guidance to workers regarding their tax liabilities.
Criticism of the Proposed Laws
Tax consulting company RSM has raised criticism of the proposed tax laws. According to the employer solutions partner at RSM, David William-Richardson, a consistent approach is required instead of different employment models.
He stated that it’s difficult to distinguish between self-employed individuals and those working for self-employed platforms. A uniform policy is required for all gig workers instead of those that work.
We have recently seen the confusion and chaos caused due to the IR35 taxation rules. When tax laws become fragmented, it leads to problems due to an uneven playing field.
The operations director at APSCo recruitment agency, Samantha Hurley, has also criticized the OTS’s recommendations. She has stated that it would affect the HMRC consultation regarding IR35 in the private sector. If implemented it could affect the end-client resulting in an increased burden. Implementing the changes will have unintended consequences due to which it should be withdrawn.
Agencies that provide contractors can lawfully change the off-payroll status of end clients. This is according to an employment status specialist, Matt Boddington who works as the director at Chartergates.
According to Mr. Boddington, the Income Tax (Earnings and Pensions) Act sections 61M to 61T implies that the party responsible for payment of income tax — the contracting agency — is not obligated to act according to the conclusion of the client regarding employment status. He says that the provision of section 61M(1) clearly shows that the fee-payer has the only legal authority as per the IR35 tax rules to make deductions from payment to the worker.
An assessment of a client is not sufficient to determine whether the IR35 applies to a worker. The assessment is only treated as advisory and the party making the payment has the sole authority to cut taxes.
Boddington says that the contracting agency is not under any obligation to even know what is the assessment regarding the client. The legislation only mandates the client to deliver the assessment to a party making the tax payment. Unless the fee-payer is engaged by the client, there is no need to know about the outcome of the assessment.
Faux Pas Regarding Obligation for IR35 Tax Deduction
Since the introduction of the IR35 legislation, many have been confused regarding who has the authority over determining the tax status of contractors.
The IR35 legislation doesn’t make any statement that the fee-payer does not have to know or accept the conclusion of the client. HM Revenue and Customs (HMRC) has encouraged fee-payers or contractors to make tax deductions according to the assessment of the end client.
HMRC’s IR35 private sector consultation even proposes imposing a fine if the fee-payer does not deduct taxes as per the assessment of the end-client. This suggests that HMRC while being aware of the grey area in the tax rules has not acted according to the legislation in introducing IR35 in the public sector.
Contracting agencies are urged to comply with practices that Boddington considers a cunning drafting of IR35 legislation that plays into the hands of the taxation authority.
The biggest mistake with the IR35 off-payroll legislation is the assumption that the contracting agency is liable of an incorrect assessment of taxes. But this is contrary to the existing Income Tax (Earnings and Pensions) Act. This cunning bit of drafting by HMRC has resulted in blanket assessments that have resulted in a lot of contractors wrongly deemed to be within the scope rules.
In the latest development regarding “worker status” and the “gig economy”, and applying this week’s earlier Supreme Court decision in Pimlico Plumbers, the High Court has rejected the Independent Workers of Great Britain trade union application for a judicial review of the Central Arbitration Committee’s decision that Deliveroo riders are not “workers” based on the terms of Deliveroo’s “substitution clause”.
The High Court has today applied what the Supreme Court held in Pimlico Plumbers to be the “sole test” of whether there is an “obligation of personal performance”. It noted that the Central Arbitration Committee had been properly sceptical of the concept of Deliveroo’s “substitution clause” given that it meant that riders were under no obligation to work at all and had no obligation to perform work personally even after they had accepted an order.
The High Court held that the contractual clause upon which Deliveroo relied can be clearly distinguished from that in Pimlico Plumbers. Unlike in Pimlico Plumbers, Deliveroo’s substitution clause is expressly detailed in riders’ contracts, it is prominently drawn to their attention and it is operated in practice, including during deliveries. These findings of fact meant that the Central Arbitration Committee had been entitled as a matter of law to find that riders are not “workers” within the relevant statutory definition.
The High Court did, however, grant permission for a judicial review in due course based on one of the five grounds of appeal advanced by the IWGB. This ground is that the Central Arbitration Committee failed properly to engage with submissions made by the IWGB that the definition of a “worker” in the Trade Union and Labour Relations (Consolidation) Act 1992 in the context of an application for trade union recognition must be interpreted in a manner compatible with Article 11 of the European Convention on Human Rights on trade union rights.
The High Court granted permission for a judicial review on this limited basis “with some hesitation”. It also refused the IWGB’s application for costs protection, noting that this ground of appeal does not raise issues of general public importance as the nature of “worker status” cases is that they are all highly fact-specific. It accordingly noted that this appeal would not be a matter of common interest to the wider so-called “gig economy”.
Disguised remuneration schemes are tax avoidance arrangements that cost the Exchequer hundreds of millions of pounds each year.
They seek to avoid Income Tax and National Insurance contributions by paying scheme users their income in the form of loans instead of ordinary remuneration.
The loans are provided on terms that mean they are unlikely to be repaid, so they are no different to normal income and are taxable.
The charge on outstanding disguised remuneration loans, known as the 2019 loan charge, was announced at Budget 2016 and was introduced in the Finance Act (No 2) 2017.
The charge will apply to all loans made since 6 April 1999 if they are still outstanding on 5 April 2019. The charge will not arise on outstanding loans if the individual has agreed to a settlement with HM Revenue and Customs (HMRC) under existing law before 5 April 2019.
The vast majority of people pay the right amount of tax on time, but a small number of individuals and businesses try to avoid paying what they owe through tax avoidance schemes.
The charge has been introduced to tackle the use of these schemes and ensure that users pay their fair share of tax and contribute towards the publicly funded services we all use. This policy is expected to raise £3.2 billion for the Exchequer.
Disguised remuneration schemes have always been an attempt to avoid tax. HMRC’s view has consistently been that these schemes are ineffective, challenging their use and publicising their risks.
The charge will affect users of disguised remuneration schemes who haven’t repaid their loans or signed a contract for settlement with HMRC by 5 April 2019.
It is estimated that up to 50,000 individuals, or less than 0.2% of individual Income Taxpayers in the UK, will be affected by the loan charge.
Based on the information available, 65% of those affected work in the business services sector. This includes professions such as management consultants and IT consultants. Ten percent work in construction. Fewer than 3% work in medical services (doctors and nurses) and teaching.
Disguised remuneration schemes users, on average, earned twice as much as the average UK taxpayer. Seventy percent of users have used these schemes for 2 years or more. Repeated use of disguised remuneration schemes will inevitably result in large tax liabilities.
HMRC wants to make it as easy as possible for people to come forward and settle their tax affairs.
Users of disguised remuneration schemes should register their interest as soon as possible. All the information required to settle must be sent to HMRC by 30 September 2018.
Since the loan charge was announced, more than 5,000 individuals and employers have agreed to pay the tax they owe, contributing more than half a billion pounds of additional revenue to the Exchequer. A further 20,000 people have contacted us to register an interest in settling.
We appreciate that for some people who have used these schemes, paying the tax due will have a significant impact. Flexible payment arrangements are available to anybody who has genuine difficulty paying what they owe.
HMRC will allow scheme users to spread their payments over 5 years if their taxable income in 2018 to 2019 is estimated to be less than £50,000, as long as they are no longer in avoidance.
Those with higher incomes and those who need to pay over a longer period can also request for extended payment periods, which will be considered on individual circumstances.
If anyone is concerned that they have no realistic way of paying what they owe, they should call HMRC as soon as possible on 03000 534 226.
HMRC has a range of powers to tackle those who promote or enable tax avoidance, including imposing penalties of up to £1 million or the whole of the fees earned for attempting to enable avoidance.
A million public sector workers are to receive their biggest pay rise in nearly 10 years, the government says.
It includes 2.9% extra this year for the armed forces, 2.75% for prison officers and 3.5% for teachers.
Police will see a 2% rise, the same increase seen by junior doctors, GPs and dentists.
The move confirms the scrapping of the 1% pay cap last year and follows campaigns by unions for higher wage rises.
The government said the increases were affordable within its spending plans. Individual departments are having to fund the pay rises, rather than the money coming from the Treasury.
‘Decade of pay cuts’
Labour called for the government to “end the cruel pay cap once and for all”.
Peter Dowd, the party’s shadow chief secretary to the Treasury, said: “Public sector workers have faced nearly a decade of austerity pay cuts and an onslaught on their living standards.
“The government’s offer fails to compensate workers for the huge losses in income they have faced under the Tories’ brutal pay restraint policy.”
He added that “the lack of new funding for departments also means pay rises will have to come at the cost of other services”.
- Reality Check: Is this the end of the public sector pay cap?
- Pay cap to be lifted for police officers
- Call to guarantee public sector pay rise
A new pay deal for the NHS was announced in March, promising a 6.5% increase over three years.
Workers voted on and agreed to the deal in June, meaning 1.3 million were to see the rise in their July pay packets.
The cap for police and prison officers was also lifted last September, with unions accepting rises of 1% with a 1% bonus and 1.7%, respectively, for this year.
The cost of scrapping the 1% cap is estimated at £4bn. The move was seen as a bid to boost staff recruitment and retention as well as improve morale in the public sector.
The Minister of State for Children and Families, Nadhim Zahawi, said it was right for teachers to get a pay rise.
“It is good news,” he told BBC News. “You can’t have great schools without having great teachers – and we’ve got to make sure they are paid properly – and ultimately we’ve got to find the money from budgets in government.”
Unions had been arguing for pay rises closer to 5% to make up for the austerity measures introduced by David Cameron’s government eight years ago.
The rise for members of the armed forces is 2%, falling short of the 2.9% recommended by the Armed Forces’ Pay Review Body, but is being supplemented by a one-off payment of 0.9% this year.
Nearly 21,000 contractors including many IT professionals and NHS locums were ordered to pay back around £1 billion in unpaid taxes. They were found guilty of evading taxes through avoidance schemes run by offshore companies.
HM Revenue & Customs (HMRC) had found that many independent contractors had let off-shore umbrella companies collect payments on their behalf. These payments were then paid to the workers in the form of ‘non repayable loans’. As a result, they evaded their income tax and national insurance (NI) liabilities.
The workers who had admitted to taking part in the tax avoidance schemes owe an average of £50,000 each in unpaid taxes. Collectively they have to pay about a billion pounds to the Exchequer.
HMRC insists that workers caught in the avoidance scheme will have to pay back the taxes in full. The workers will more likely enter into an arrangement to pay back in instalments.
The UK tax revenue authority expects that around 30,000 more contractors will likely come forward before 30 September. This is the deadline to avoid a hefty fine on top of the tax liability. About £500 million has been already collected from 5,000 contractors.
Freelancers Criticise the Clampdown as Unjust
The freelancers criticised the clampdown by HMRC. They say that they did not know about the scheme as being illegal. The promoters had told them that the scheme was ‘approved by barristers’.
But they also admit that they were foolish in believing in the promises. They were attracted by the offer that 85 to 95 percent of their wages will be free of taxes.
The Secretary general of the Independent Health Professionals Association (IHPA), Iain Campbell, had said that their advice to independent contractors has always been to avoid loan schemes at all cost.
Most of the tax avoidance schemes are run by off-shore companies based in locations such as Malta or Isle of Man. These companies are often operated through different addresses and names. As a result, they are rarely caught.
Around 65 percent of the affected contractors work for the business sectors. They mostly work as IT or management consultants. Also, 10 percent of workers relate to the construction sector, and about 2 percent relate to the medical sector. About two-thirds of the workers were in the scheme for more than two years. These workers were earning double the national average age, according to the HMRC.
The Employment Appeals Tribunal (EAT) has recently awarded a ruling in favour of the NHS staff. In the Flower v East of England Ambulance Trust, the staff had won the right to claim six years in underpaid holiday pay.
As per the employment terms and conditions of the ‘Agenda for Change’, the staff were allowed all voluntary overtime payments in lieu of the holiday pay.
The Right of Holiday Pay
Workers have the right to receive holiday pay as per the Holiday Pay Act of 1938. It is a type of paid time off that workers receive when they go on a holiday. The payment is calculated based on the average earnings in the past three months.
Previously, the holiday pay was paid only when workers go on a holiday. However, this has been a subject of criticism and legal challenges.
Holiday payment claims are generally brought under the Employment Rights Act 1996. The claim seeks compensation for a series of unlawful deductions. But proving the claim case has been difficult in the past due to technical arguments employed by the employer. The law also provides that claims after1 July 2015 cannot go more than two years.
In the present case, the workers were employed for the ambulance service. Their nonguaranteed overtime included holiday pay. But the voluntary overtime did not include any holiday pay. This was regarded as a contractual and statutory right of employees.
The right to receive holiday pay was included in the NHS terms of employment. It was clearly stated that the paid annual leave will consist of regularly paid supplements and overtime. However, NHS had argued that voluntary overtime is included in the holiday pay.
The EAT had relied on Dudley Metropolitan Borough Council v Willetts case in making the decision. It stated that voluntary overtime should be a part of the holiday pay. This should be the case when the employees have been regularly given the pay. Therefore, the voluntary overtime amounted to holiday pay. As per the terms of the contract, workers had the right to receive this pay as part of the holiday pay.
Aftermath of the Decision
The current ruling by the EAT has set a precedent regarding holiday pay. All voluntary and nonguaranteed overtime payments must be accounted for when determining the holiday pay. The decision will have implications for workers in the UK who are employed under the ‘Agenda for Change’ employment terms.
Employees can now make a claim for underpaid holiday pay going back to six years. This could cost the company millions of pounds. The decision will also have relevance to employees who have been employed in other agencies under the employment terms similar to one adopted by the NHS.
But the question remains whether the overtime should be a part of the pay in case there is no similar contractual clauses.
BBC prepares to spend around £1,000 per worker to help them comply with new tax crackdown on those earning less than £45,000
The BBC is set to splash out up to £1million of licence fee cash to settle accountancy bills for hundreds of workers.
TV and radio show employees on less than £45,000 have been caught up in a tax crackdown on all staff – including star presenters – formerly paid via ‘personal services companies’ through a self-employment loophole.
A new HMRC law means all public bodies, including the BBC, must get workers’ job status correct, placing any liabilities for tax and NI contributions with them.
The IR35 legislation has meant lower paid staff – including some regional programme presenters – have had to cough up extra accountancy fees to comply.
Now the Beeb is understood to be set to pay up to 1,000 employees’ fees at around £1,000 each “to keep the peace”.
According to sources: “Staff were incensed the new legislation was going to cost them even more money in extra accountancy fees on top of the extra tax they’re now being forced to pay.
“To keep the peace, bosses have accepted it’s a mess and agreed to cover the costs. But it’s the public left footing the bill.”
In an email to staff this month, seen the Sunday Mirror, BBC Director of Radio and Music Bob Shennan wrote: “Thank you for the claims we’ve received for the ex-gratia contribution for additional book-keeping fees.
“We are now processing these, with the aim of paying as many as possible via the August payroll.
As previously outlined, this is available for anyone earning less than £45k from the BBC during 2017/18 and who has incurred additional fees arising from the implementation of IR35 legislation.”
BBC faced losing some of its top stars over the issue as they faced having to pay back big sums in tax under the new rules.
Telly favourites including Fiona Bruce and Jeremy Paxman have both said in the past they were “required” by the BBC to be paid through service companies.
A BBC spokesman said: “Changes to tax legislation have resulted in significant additional costs for some in producing the legally required financial year end reporting. So we’re offering ex-gratia one-off assistance to those earning less than £45,000.”
An article published in The Times last week made alarming revelations. HM Revenue and Customs (HMRC) has instructed 20,919 freelancing professionals to pay over £1 billion in unpaid taxes. The NHS locums and independent contractors who had used tax avoidance schemes for years had to pay back the taxes. Freelancers involved in such schemes were advised to approach HMRC to negotiate a settlement.
The Freelancer and Contractor Services Association (FCSA) advised freelancers involved in such schemes to approach HMRC to negotiate a settlement. Failure to do so could result in high penalties. The UK’s largest Umbrella company had encouraged freelancers to come to a settlement before 30 September.
According to CEO of FCSA, Julia Kermode, companies that do not block tax evasion practices by staff members could be criminally liable. They could be prosecuted under the Criminal Finances Act for tax evasion. This can result in a criminal conviction and huge fines.
Ms. Kermode emphasized the importance for recruiters to ensure no tax avoidance occurs within the supply chain. Not taking any action in this regard will result in damage to the good name of the recruitment business. It will also injure relationships with clients and supply chain partners.
She had advised recruiters to ask supplier on the Preferred Supplier List (PSL) questions such as; Does the supplier also make payments to workers? Is the supplier company contracting with a local company? Is the supplier paying the correct amount of VAT, PAYE tax, and NI to HMRC?
In case the answer is no to any of the above questions, it’s important that the recruiter must take the required corrective measure.
Ms. Kermode has advised that things are usually not how they appear. That’s why recruiters should hire a member of an accredited organization to carry on compliance checks.
All Umbrella Companies included in the supply chain must comply with the law. They must also ensure full payment to workers as per the minimum wage rates. Every payment to the contractor should be through Real Time Information payroll software. Also, the overarching employment contract should include benefits such as sick pay, holiday, and others.
Employees should have access to a workplace pension and provided guaranteed working hours. They should have all statutory employment rights protected by legal provisions.
In case the expense allowances seem out of the ordinary it should raise red flags. This is because they may not conform to HMRC legislations resulting in hefty fines.
HM Revenue and Customs (HMRC) has submitted a proposal that would provide access to bank accounts of taxpayers without getting their permission or that of the tax tribunal.
The proposals were introduced in a government consultation titled, Amending HMRC’s Civil Information Powers. The consultation regarding the proposal was started last week and the closing date is 2 October.
HMRC has stated that the proposed authorization is necessary for it to remain effective in bearing down on tax avoidance practices. It said that the conditions that existed about a decade ago when the current legislation was implemented.
Existing laws require HMRC has to show that the information is required and meet the criteria mentioned in Schedule 36. Under Schedule 36 Part 2 of Information and Inspection Powers, HMRC can enter the business premises, inspect documents, and check the tax position of the person. This inspection can be carried out without getting approval from the tax tribunal. Also, there is no right of appeal against the inspection. However, HMRC wants additional powers to gain access to bank account information relating to taxpayers.
HMRC had said that safeguard will be provided to ensure that the power remains appropriate and proportional.
Professionals Not Convinced with HMRC Arguments
Most professionals are not buying into the arguments made by HMRC.
According to an article published in the ICAWE website, the new measures represent a significant change regarding individual’s privacy law. Approval from the tax tribunal is an essential protection against access to personal data by third parties.
MD of Fairer Finance, James Daley, has stated that the current system safeguard privacy and personal rights. The fact that HMRC can request confidential information from individuals bank from property agents, and other third-party companies. They can gain access to the information without getting approval from individuals, which is shocking.
But HMRC insists that the current framework hinders activities to ensure tax compliance. A disproportioned amount of time and resources are involved in getting the required information.
A spokesperson for HMRC had stated that accurate information is important in preventing tax evasion and avoidance practices. Non-compliance with the tax rules has a negative impact on public companies such as the NHS. People who respect the law and pay taxes don’t have to worry about anything. The proposed powers will improve the effectiveness and efficacy of the organization in tackling tax compliance issues.
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