The Association of Taxation Technicians (ATT) has expressed concerns ahead of the new IR35 legislation coming into effect from the 6th April 2017. It is widely acknowledged that the changes will affect many thousands of contractors who currently work in the UK public sector. However ATT have additionally highlighted issues in relation to how IR35 employment status decisions will be effectively managed going forwards. The lack of an effective appeal process for affected contracting professionals to appeal against IR35 decisions has been identified as a key concern. Such a mechanism may be required in circumstances where a contractor is contentiously required to pay more tax as a consequence of their public sector end client’s decision, that the individual is deemed an employee rather than a genuine contractor.
As things currently stand, if a contract is deemed inside IR35, then the intermediary has to operate PAYE and National Insurance Contributions at the end of the tax year on any income it has received that has not already been paid out to the worker as salary or wages during the tax year. However things are set to change from 6th April when public sector bodies will become responsible for determining the IR35 status of each of their contracts. If the public sector body decides a contract is deemed inside IR35, then the intermediary paying the individual will be required to deduct tax and national insurance contributions in an identical manner to standard employees. The new legislation however includes no provision for contractors to appeal against the IR35 designation of a public sector body.
Co-chair of ATT’s technical steering group, Michael Steed said “We urgently need clarity from the government on the new rules in respect of those workers contracted to work for a public body client through an intermediary.’
“Shifting the liability to assess whether an engagement is akin to employment or self-employment to the public sector body may lead to some decisions that workers find arbitrary, inaccurate and unfair. It is disconcerting at this stage that there has been little debate or guidance on how such a worker can contest or appeal decisions of the public sector body.”
Source: Small Business (www.smallbusiness.co.uk) March 3rd 2017 - Appeal process needs clarifying ahead of IR35 changes in the public sector