Increased HMRC powers highlight critical importance of tax compliance.

IR35 chance was missed.

While the budget has seen IR35 measure go through unchanged, the Chancellor also made mention of increase resources for HMRC in their work against tax avoidance. The actual investment heading HMRC’s way remains ‘unspecified’ but this would seem to be another indication of global authorities clamping down on unscrupulous behaviour. “This is just one of many steps that are being taken by global authorities to prevent tax avoidance worldwide and demonstrates just how serious the likes of HMRC are in taking action,” said Michelle Reilly, CEO of 6CATS International. “While the exact investment is yet to be revealed, we do know that this will be used to fund additional compliance officers and new technology to make it easier to identify fraudulent activity. For recruiters and contractors alike, this news really does highlight the need to ensure compliant processes are in place.”

Reaction from suppliers in the sector reflected a mixed bag of a budget, combined with measures to mitigate the impact of coronavirus: “There’s plenty of good news for business – more cash for R&D and big investments in transport and digital infrastructure, but sadly IR35 has not been delayed.” commented James Poyser, CEO of inniAccounts and founder of  offpayroll.org.uk. “And there’s a paradox: these large investments are project based, and need to be delivered by a flexible expert workforce and small consultancy firms who can roll on and off projects as needed. But, even before April, the disastrous IR35 reforms have already decimated the UK’s flexible workforce. The right thing would have been to announce wider reforms to make the self-employed valued first-class citizens, with employment rights, and allow them to play their part in ‘getting it done’.”

Bob Trunchion, tax partner at MHA MacIntyre Hudson was impressed by the coronavirus relief measures but said the Chancellor seemed to have forgotten about medium sized businesses and the implications of IR35:

“The Chancellor unveiled a formidable package of reliefs for businesses but most only applied to small companies,” he said. “A company needs to have fewer than 250 employees, in the case of the sick pay refund, or rateable values of less than £51,000 to benefit from small business rate relief.

“It’s true that smaller businesses are more vulnerable but even some larger companies could experience substantial cashflow problems if the virus starts to bite. In addition, from 6 April the changes to IR35 come into force, another major challenge for medium sized companies in sectors like IT and construction.

“IR35 has added a sting that impacts whether some businesses will qualify for coronavirus relief measures. The new rules mean that many medium sized companies have pre-emptively taken on previously contracted workers as employees, swelling the numbers on their payroll. Some will now be too big for reliefs like the sick pay refund, but would have been eligible had IR35 been delayed. These companies will miss out on any meaningful support but still have all the cashflow risks the virus could prompt.

“The Chancellor may have missed an opportunity to help these businesses by restricting access to the Coronavirus Business Interruption Loan Scheme, medium sized companies should also have been included. Delaying the IR35 reforms would also have been welcome. The bright spot is the upgrade to Time to Pay which does benefit everyone.”

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