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Off-payroll working rules consultation – Law Society response

Last updated: 26 September 2019

The proposals

HM Revenue and Customs (HMRC) is consulting on a proposal to extend the off-payroll tax rules to the private sector from April 2020.

The off-payroll working rules were introduced for engagements in the public sector in April 2017.

The rules are used to determine how employment taxes apply to individuals who provide services to a client through an intermediary (such as a personal service company).

The proposals would:

  • shift the requirement to determine employment status from the worker to the client
  • affect the obligation to account for such tax to HMRC

Our view

As the proposals currently stand, we expect the new rules to the problematic in practice.

They shift the risks of getting employment status determinations right to taxpayers in a way that is unfair.

The secondary liability provisions proposed would also shift risks of default to compliant taxpayers.

What this means for solicitors

Solicitors who advise on employment tax matters would be affected by these proposals.

The proposals would also have an impact on solicitors who work through personal service companies and law firms that engage solicitors through them.

Next steps

The consultation closed on 28 May.

It informed a summary of responses and draft Finance Bill legislation published by the government on 11 July.

We submitted a further short consultation response on the draft Finance Bill legislation in September.

It picks up concerns we raised in our first response about the imposition of secondary liabilities on top parties in the labour supply chain who are not at fault.

Although the government’s summary of responses indicates their position on this has changed positively to limit the application of secondary liabilities, we point out that the draft legislation does not currently reflect this positive change.

We expect the reforms to come into force from 6 April 2020.

Read the consultation and summary of responses on the GOV.UK website