HMRC criticised over decision to keep IR35 reforms in Finance Bill

HM Revenue & Customs (HMRC) has been criticised over its decision to keep IR35 reforms in the Finance Bill 2017 amidst concerns that the new rules “have not been reviewed in detail ahead of the General Election”.

The news comes after the Government dropped a series of upcoming changes from the Bill earlier this week, including HMRC’s flagship Making Tax Digital (MTD) project.

A total of 72 out of 136 clauses were dropped from the Bill, but hotly contested changes to IR35, which were introduced on 6 April 2017, were kept in.

The new rules have effectively shifted the responsibility for making sure that contractors are paying the correct PAYE and National Insurance Contributions (NICs) from the contractors themselves onto the agencies or public sector bodies that hire them.

However, one minor last-minute amendment was confirmed following the breaking Finance Bill news – which will now see that private sector retail businesses serving the NHS, such as pharmacies and opticians, fall out of scope of the new IR35 rules.

The Association of Chartered Certified Accountants (ACCA), amongst other bodies, has slammed the Government’s missed opportunity to drop the unpopular reforms altogether.

It said that that new off-payroll framework should have been shelved alongside MTD.

It added that the reforms had been “rushed through” without “the appropriate time allocated for consideration” ahead of the snap General Election.

The comments follow concerns raised by the Scottish National Party regarding the accuracy of HMRC’s Employment Status Service (ESS) – an online tool designed to help contractors determine their IR35 status under the new regime.

Kirsty Blackman, SNP MP for Aberdeen North, said: “People have told me that no matter what information they have put in, they have always been told that they have to pay more tax than they were expecting”.

In response to the criticisms, financial secretary to the Treasury Jane Ellison, has said: “I am surprised by what she says, but let us ask HMRC to look at the practical issues she raises”.

HMRC has insisted that the tool “is working correctly and has been extensively tested”.