A tax specialist has stated that the chances are high that Chancellor of the Exchequer Philip Hammond will use Budget 2017 to include the private sector in the off-payroll rules that currently cover the public sector.
Deloitte Head of Tax Bill Dodwell stated that during the budget, Hammond will request the private sector to emulate the public sector to assess whether a contractor should be evaluated for PAYE or not.
This could have a profound effect on IT contractors who are working in the private sector, as the end client will end up being responsible for tax deduction from the payments being made to the contractors.
Dodwell’s comments come after another senior executive from an accounting firm stated that Hammond would widen the scope of his Autumn Statement 2016 to encompass contractors working in the private sector.
However, both tax specialists believe that HMRC will begin a consultation rather than immediately impose the off-payroll rules on the private sector. Dodwell stated that this should be expected as extending the rules to the private sector will be extremely complex and therefore needs to well-thought-out.
Anderson Group Director Barry Roback stated that rolling out this new rule will be challenging for the Government. He believes that this would not be due to resistance from the private sector; rather, it would be because the reforms have not yet shown signs of success in the public sector.
Dodwell pointed out that introducing the public sector’s IR35 rules in the private sector would require time as it would be unfair to expect recruiters and end clients to understand the rules in a short period of time.
HMRC has also launched an IR35 digital tool, and tax experts in the UK believe that this tool will be promoted to the private sector as a way to gauge the IR35 status of contractors.
Dodwell stated that public sector organisations will be using the tool to assess whether the services of contractors fall under the purview of IR35. However, it would be challenging as suddenly there would be a new way of assessing tax.