1st Option’s clients respond to HMRC’s intermediaries’ legislation reform
1st Option has called for HMRC to review its proposals on the public sector off payroll consultation after client feedback raises data protection concerns.
Government issued a consultation document on 26th May 2016 seeking feedback on their proposals to reform the intermediaries’ legislation. The proposals suggest that a hirer, or agency acting on the hirer’s behalf, will complete a ‘test’ for those working in the public sector. If the test is ‘passed’ gross payments will be paid to the freelancer’s limited company. However, if the assignment ‘fails’ (the test) Tax and NIC (the Deemed Payment) will be deducted by either the hirer or agency and paid to HMRC through the monthly RTI system. The limited company would then receive a net payment and a Tax and NIC credit.
The company surveyed its professional freelancer clients, who provide services via a limited company, and received responses from 424 clients.
When clients were asked whether an online test would be of value to them in assessing their IR35 status, 46.83% said it would be and 53.17 said it would not. 1st Option says that the percentage of people rejected the tool relates to genuine concerns that IR35 is too complex to be ‘solved’ by a simple online tool and a mistrust of HMRC in producing such a tool.
The company then asked clients: “Hirers and recruitment businesses may be liable for Tax & NI contributions if they fail to deduct taxes correctly. This may result in Tax & NI being deducted at source from your invoiced amounts, which would then need to be reclaimed. Does this concern you?” 93% said it did, and 7% said it did not. 1st Option states that the response suggests deep and genuine concerns amongst professional freelancers.
Finally, 1st Option asked clients: “In order for the deemed payment calculation to be correct, it would need to take account of pension contributions. Would you be prepared to supply this personal data to your hirer or agency on a monthly basis?” Almost three quarters (73.54%) said no, and only 26.46% said yes. Of the three quarters who suggested an unwillingness to supply data to the end-engager there were two key issues, according to 1st Option. The first related to the increased administrative burden. The second, and more significant response, related to the data being personal and therefore not something that they wish to share.
This is a significant issue for HMRC as the concept of new legislation being brought forward that can only work if an individual is obliged to give up some of their basic human rights will surely be unsustainable.
David Mount, 1st Option managing director, commented, “Whilst we understand the concerns HMRC has over non-compliance with the intermediaries (sic) legislation and, about the fairness in the tax system in relation to an employed person verses an off payroll worker completing similar roles, we have more serious concerns that the solutions proposed by HMRC will have negative consequences for all parties involved.
“Having asked our clients for their thoughts, it is obvious they share our concerns, and we do not feel the proposed changes will resolve the non-compliance HMRC are reporting.”
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