Source · Select Committees · Public Accounts Committee
Recommendation 13
13
The realities of contracting also mean that hiring organisations will likely not have the data...
Conclusion
The realities of contracting also mean that hiring organisations will likely not have the data required to identify and correct mistakes when workers have been incorrectly engaged on a self-employed basis. In particular, the hirer would not normally collect a worker’s National Insurance number if they are self-employed. However, if HMRC later judges that the worker should have been treated as employed, it needs the National Insurance number to identify their actual tax position. This means that when HMRC finds workers have been misclassified, it normally lacks the data to accurately calculate the additional taxes owed.23
Government Response
Not Addressed
HM Government
Not Addressed
6: PAC conclusion: Despite years of reforming the IR35 rules, there are still structural problems with how they work in practice. 6: PAC recommendation: HMRC should review how the system is working and whether it can be made more efficient and effective. In particular, it should develop solutions to address problems with how the IR35 rules work in practice, including ensuring that: • HMRC has the data it needs to accurately reflect each worker’s tax position in cases of non-compliance; and • HMRC does not end up taxing the same income twice, or unwittingly contributing to workers not paying their fair share in tax. 6.1 The government agrees with the Committee’s recommendation. Target implementation date: to be confirmed 6.2 HMRC has already implemented a process to reduce the circumstances where it collects tax twice in respect of the same engagement in cases of non-compliance. Where 5 HMRC has sufficient information to identify them, it will notify the worker and their intermediary if they are entitled to claim a repayment of taxes overpaid in relation to the specific off-payroll working engagement. 6.3 Relevant information is needed from the client organisation to enable HMRC to operate the process, as they are the party who engages the worker. HMRC is seeking the required information from client organisations at the outset of a compliance enquiry to increase the chances of obtaining the relevant data. HMRC will continue to review this process to ensure it works as effectively as possible. 6.4 The legislation does not provide for a set-off for the client or deemed employer of any income tax, NICs or corporation tax paid by the personal service company or worker. However, HMRC has already set up a working group with external stakeholders to consider whether a legislative solution can be found to allow HMRC to take account of taxes that have already been paid by workers and intermediaries, ensuring that HMRC does not tax the same income twice and that workers pay a share of the tax liability. HMRC will continue with this work. 6.5. HMRC will notify the Committee of a target implementation date for meeting this recommendation as soon as this work has concluded.