Select committee: Finance Bill Sub-Committee
Conclusion 40
1st Report - Off-payroll working: treating people fairly
Published 27 Apr 2020
Paragraph 177
Finance Bill Sub-Committee Draft Finance Bill 2019 All items in this report Report on parliament.uk ↗ Inquiry on parliament.uk ↗
Conclusion (the committee's words)
Any alternative to the off-payroll working rules should be: Certain—the complexity of the off-payroll rules and the limitations of the CEST tool mean that it is difficult for clients and contractors to be certain about their position. All parties should have certainty about the tax treatment that will apply. Simple—the off-payroll rules are too complicated. Any solution should be as simple as possible. Fair—the proposed off-payroll rules are unfair because they treat contractors as employees for tax purposes only, essentially creating “zero-rights” employment. Treatment as an employee for tax purposes should only apply where there are employment rights and risk-sharing between employer and contractor. Supportive of growth—any solution should respect and preserve the flexibility that exists within the UK labour market. Administratively straightforward—the burden that the off-payroll rules imposes on clients is unreasonable. Any alternative needs to be straightforward to operate, and not excessively burdensome to administer. Enforceable—with limited resources IR35 became impractical for HMRC to monitor and enforce. Any new proposal should be manageable for HMRC.
From: Finance Bill Sub-Committee, 1st Report - Off-payroll working: treating people fairly, paragraph 177, 27 April 2020
Government response
The government responded to the whole report on 26 June 2020 (deadline 27 June 2020).
Summary written by Accountability Index from the government's response. It is not the government's own words.The government says it remains committed to introducing the off-payroll working reform on 6 April 2021, while agreeing with the Sub-Committee that the delay "should be used productively and effectively".
- It does not accept the Sub-Committee's suggestion to wait until October 2020 before announcing whether the reform goes ahead, saying that doing so "would create uncertainty".
- On research, it intends to make independent research on the long-term effects of the 2017 public sector reform available before April 2021. On the Sub-Committee's call to defer private sector research to 18 months, it says early research matters but that it "will consider how best" to monitor impact over time.
- It "disagrees" with the Sub-Committee's view that the CEST tool is not fit for purpose, citing HMRC's investment and testing against case law, though HMRC are "actively considering" further support for users who receive an "unable to determine" outcome.
- HMRC will review the estimated administrative burden on businesses and will "publish the revised administrative burden costs at the next fiscal event". It will also use the delay to complete an evaluation of its education and support offer, which will inform an enhanced programme of targeted support ahead of April 2021.