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Targeting IT Talent

IR35 Off-Payroll rules - Constructive meeting with FCSA and HMRC

The Freelance & Contractor Services Association (FCSA) has described a meeting on Wednesday [14 October] with HM Revenue & Customs officials about an “errant clause” that recently surfaced in IR35 legislation as “positive and constructive”.

The extension of the off-payroll rules into the private sector (IR35) from 6th April 2021 will see the client, and not the contractor, be responsible for assessing IR35 status. For Inside IR35 assignments, the fee payer will have to make tax and national insurance deductions before paying the personal service company.

The clause, identified this past week by the off-payroll consultancy IR35 Shield, could have made umbrella firms serving freelance and contractor professionals redundant when the latest off-payroll reforms take force in April 2021.

In a statement, FCSA said HMRC “accepted that there is a clear problem with the legislation as it currently stands, surrounding the definition of ‘intermediaries’ and the resulting impact on who is and who isn’t required to make payroll deductions from payments moving through the supply chain”.

The statement went on to say: “HMRC has accepted that it was never an intention of the reforms to stop a compliant umbrella company from operating as it does today when the new rules come into effect.”

The FCSA said further that HMRC “will be working swiftly” to handle the matter and “share our view that primary legislation via the Finance Bill is almost certainly the route to doing so”.

HMRC is expected to issue a statement today [15 October] acknowledging that the market and contractors need reassurance. According to the FCSA, HMRC has also indicated that “they are keen to progress any draft amendments to the legislations in consultation with the FCSA”. 

Dave Chaplin, founder and CEO of IR35 Shield, said he was “delighted” to see that HMRC was going to take swift action to address the findings of IR35 Shield’s technical paper. “It shows that they have listened to our concerns that the legislation was unambiguous and that a change to primary legislation is vital in order to fix the issue,” Chaplin said.

Posted 15.10.2020

Category: IT market news | For candidates | For clients

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