Mike Lavan, Director of Tax and Pensions at KPMG, comments on the IR35 reform in the public sector.
Mike Lavan, Director of Tax and Pensions at KPMG, comments on the IR35 reform in the public sector that was announced in today’s Budget:
“The Chancellor’s focus on off-payroll workers in the public sector comes as little surprise in light of HMRC’s recent IR35 discussion paper. The Government now expects to combat revenue leakage from non-compliance and raise £555m from the measure over the coming years.
“While the new rules are likely to impose a greater administrative burden on public sector bodies, which will need to determine whether their off-payroll workers fall under the rules, inaction was not an option for the Chancellor. As we move towards implementation in April 2017, consultation with businesses and other stakeholders will be required to help shape the tests and rules that apply the legislation.
“Interestingly, off-payroll workers engaged in the private sector remain unaffected by these measures for now. This will be welcomed by businesses as the potential administrative and financial burdens of managing IR35 compliance has led to significant concerns being expressed during discussions with HMRC. It remains to be seen whether the Government’s position will change in the future, as the new rules for public sector bodies take root.“We will wait to see whether today’s announcement is a short-term measure, as we anticipate a longer term need to review and clarify the boundaries between the taxation of the employed and self-employed if the Government is to truly address any perceived inequities in the system.”
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