The Association of Taxation Technicians (ATT) welcomes the Chancellor’s announcement today of a review of the off-payroll rules. But the ATT continues to call for the introduction of the rules to the private sector to be delayed by 12 months.
If the rules are implemented in the private sector as proposed in the draft legislation then, from 6 April 2020, responsibility for determining whether an engagement falls within the off-payroll rules will move from the worker’s personal service company (PSC) to the client (the business which requires the worker’s services). The party which pays the PSC - which may be the client, or an agency depending on the commercial arrangements - will then be required to operate PAYE and NICs as appropriate.
A lack of final legislation – or detailed guidance - means a lack of clarity as to how the off-payroll rules will operate in practice in the private sector, says the ATT. The ATT fears that this makes it near impossible for businesses to make adequate preparations.
Under the current timetable there remains less than three months for businesses to get ready for the change, and this at a time when many will be preparing for or responding to the implications of Brexit, remarks the ATT.
Jon Stride, Co-chair of ATT’s Technical Steering Group, said:
“We are pleased that the Government has committed to further engagement regarding the operation and impact of what will be a fundamental change in how businesses engage with contractors.
“Despite today’s announcement, we reiterate our call for the introduction of these rules to the private sector to be delayed until 2021. The announcement of this review increases the need for a delay. We note that the Government’s review is intended to conclude by mid-February, which we believe not only to be overly optimistic, but also only leaves less than two months for its findings to be put into effect. As the Budget will not take place until 11 March 2020, the subsequent Finance Bill containing the legislation for these rules will only be published a little over three weeks before they are due to take effect.”
Many important practical issues, such as when liability can be transferred within an engagement supply chain and exactly what information will need to be shared by clients, are not addressed in the draft legislation for the off-payroll rules at all. The ATT has also seen only limited evidence of any HMRC education and information campaigns so far.
Jon Stride said:
“Without a delay, we fear seeing low levels of compliance and increased numbers of errors and greater demand on HMRC telephone lines and staff for support at a time when their resources are already strained. We may also see risk-averse positions being taken by businesses, for example, a blanket decision to put all workers onto the payroll regardless of the nature of the arrangements, to the detriment of workers.
“The Government has previously stated that it was committed to learning from the rushed introduction of these rules to the public sector in 2017. We believe that introducing the off-payroll rules to the private sector in April 2020, when final legislation and detailed guidance are not yet available, risks repeating the errors made in the public sector, rather than learning from them.”
Notes for editors
- Changes to the off payroll rules which are scheduled to be introduced for the private sector from April 2020. Similar changes were introduced in the public sector in April 2017, and were criticised widely for being rushed.
This was acknowledged on page 10 of HMRC’s summary of responses to the consultation Off-payroll working in the private sector, dated 29 October 2018, which stated:
"The government is committed to learning from the public sector reform in taking forward similar reforms in the private sector. Based on the feedback received, the government will ensure that organisations have sufficient time to prepare for the changes by implementing the reform in April 2020, rather than April 2019. This is in recognition of the need for organisations to set up systems to comply with the reform and review existing contracts”
Delays in detailed guidance and final legislation being published for the private sector reform risk a similarly rushed introduction of the rules.