Pressure on Public Bodies Ratches Up over Off-Payroll Working (‘IR35’)
Over the weekend, news has broken that the Department for Work and Pensions (DWP) has settled a liability of £87.9m in relation to off-payroll working compliance failures. Reports suggest that HMRC undertook a review in March 2020 and established that DWP had incorrectly assessed the status of 247 out of its 1,025 contractors (those earning at a rate of £245 per day or more), despite using the CEST tool for its determinations. All but £0.4m of the overall settlement related to the tax years 2017/18 to 2019/20.
An arm of the DWP that provided it with Digital Technology Services, BPTDS Limited, was also found to have erred. The Technology arm, which was absorbed into the DWP earlier this month, had to pay a further £6.9m in retrospective liabilities.
This news brings into sharp focus the importance of having robust procedures in place to deal with off-payroll working. It also coincides with the news, received last week from a senior member of HMRC’s Employment Status and Intermediaries team based in Cardiff, that HMRC is set to undertake a review of local authority off-payroll working. We were reliably informed that plans are “well under way” and that all local authorities would be receiving a questionnaire in the near future. Based on the information returned by authorities, HMRC will select its targets for full off-payroll working/IR35 compliance reviews.
When we advised the contact that almost half the local authorities in England and Wales were clients of PSTAX, he promised to send us the questionnaire a day or so in advance of it being circulated so that we could, in his words, “give clients a nudge”. With the holiday season now upon us, we suspect that the questionnaire will be sent in September at the earliest. This gives a little time for those who may struggle to demonstrate that they have ‘taken reasonable care’ to start to put appropriate procedures in place.
In addition to the usual support we can offer public bodies, such as pre-HMRC reviews, support with policy/process documentation and online training, PSTAX has been investing considerable time and effort in putting together its e-Learning modules on off-payroll working. These are designed for hiring managers and will help to clarify how the rules work and explain how the CEST questions should be interpreted in order to achieve an accurate assessment. We anticipate that the two modules will be ready to offer to clients by mid-September. For more information on these, or any aspect of off-payroll working, please contact Duncan Groves.