Recommendation 14

Furthermore, the current legal framework does not let HMRC offset liabilities for non- compliance against any taxes already paid by workers and their PSCs.24 In law, HMRC must collect the full taxes that should originally have been paid from the hiring organisation. This means that HMRC collects tax twice on the same income, and that workers become able to reclaim all the taxes they already paid without needing to compensate the hiring organisation.25 Ironically, the public sector may therefore end up paying all the tax on workers it incorrectly assessed as self-employed. HMRC does not know how much this is happening, or to what extent it means the public sector is effectively subsidising private contractors.26 One tax advice firm told us that this issue has been raised with HMRC for some time, but HMRC has no current plans to address it.27 17 Qq 44–45 18 Qq 46, 48 19 ICAEW written evidence dated 11 February 2022 20 Q55 21 Q22 22 Qq 62, 64 23 Q56; C&AG’s Report, paras 4.12–4.13 24 Q15 25 C&AG’s report, paras 4.13–4.14 26 Qq 15, 17 27 Contractor Calculator written evidence dated 12 February 2022; C&AG’s report, para 19 Lessons from implementing IR35 reforms 11 2 Understanding the impacts of the IR35 reforms The impact of the reforms on workers and labour markets