IR35 Double Taxation issue to be tackled?
- The Office for Budget Responsibility, the government’s fiscal watchdog, recently raised it's estimate for tax receipts under IR35 to £1.5bn annually.
- Industry commentators have expressed the view that this demonstrates that companies have "over-complied" with the legislation, as witnessed by blanket assessments or even blanket bans on contract staff.
- Consequently, a cautious welcome was extended last week to the government's plan for consultation on the issue of potential “double taxation” under IR35, with some observers expressing the opinion that, once resolved, companies could be more willing to engage in a realistic assessment process, which could result in more roles receiving an "outside IR35" determination.
- The Consultation period on the potential double taxation issue is short (ending in June this year) so legislation could be introduced removing the threat of double taxation by April 2024.
- The potential for double taxation currently exists in cases where HMRC determine that an “Outside IR35” determination had been arrived at incorrectly, and are able to assess that all tax due on the basis of an inside IR35 assessment should be paid by the fee-payer, even if some tax has already been collected for the assignment from the contractor.
- The possible remedy would be to take account of any tax already paid on the assignment by the contractor when assessing the fee-payer liability, hopefully meaning that clients and agencies shoulder less risk when engaging a contractor on a business-to-business, Outside IR35 basis
- Such legislation changes would still be some months away. In the meantime Outside Spy has witnessed a fall in the number of contracts advertised in April, although there are still over 1350 active IT contracts that have been assessed and advertised as outside IR35 currently on our database. Roles are aggregated from all the main job boards, as well as individual agency and direct hire company websites.