Source · Select Committees · Public Accounts Committee
Recommendation 14
14
Furthermore, the current legal framework does not let HMRC offset liabilities for non- compliance against...
Conclusion
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
Government Response
Not Addressed
HM Government
Not Addressed
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 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.