Treasury to consider extending controversial IR35 rules

Concerns are mounting that many self-employed freelancers could be hit by a new tax crackdown, after the Treasury announced it was considering extending HM Revenue & Customs’ (HMRC) new off-payroll rules to the private sector.

The new rules, which were first phased in for the public sector in April this year, now see public sector companies, bodies and agencies responsible for determining the IR35 status of the contractors they provide work to.

Previously, responsibility lay with the contractors or freelancers themselves, until the new rules were introduced in a bid to target temporary ‘off-payroll’ workers operating in the public sector whom HMRC felt could feasibly be classed as ‘employees’ as opposed to contractors if their services were delivered directly.

Ever since April 2017, rumours have been mounting that HMRC will eventually extend the new rules to the public sector.

In recent days, it has been made clear that the Treasury is now pushing for the extension as part of ongoing efforts to curb tax avoidance.

Mel Stride, Financial Secretary to the Treasury, told a recent interview with the Financial Times: “The public sector has undergone a behavioural change which means we are seeing far fewer [workers] offer their services through service companies and yet the private sector is able to carry on with that behaviour unchecked

“It is not just the issue of tax. It is also an issue of fairness between the public and private sector,” he said.

The comments follow a recent survey carried out amongst contractors and freelancers, which found that almost half (48 per cent) feared that an extension of the off-payroll rules to the private sector was just around the corner.