Government Response

The Government responded to this petition on Monday 28th October 2019

The Government remains committed to reforming the off-payroll working rules from April 2020. Businesses have had 18 months to prepare. HMRC are providing support and guidance to help them get ready.

Background
The off-payroll working rules were introduced in Finance Act 2000 and have been in place for nearly 20 years. They are designed to ensure that individuals working like employees but through their own company pay broadly the same tax and National Insurance contributions (NICs) as those who are directly employed.

Issue
Unfortunately, non-compliance with these rules is widespread, and costs the Exchequer a great deal of money each year, at the cost of our vital public services, placing unfair pressure on taxpayers as a whole. To address this, in April 2017 the Government reformed the way in which the rules operate in the public sector. The reform moved responsibility for determining whether the off-payroll rules apply from individual contractors to the public bodies engaging them. The reform did not introduce a new tax.

The reform
Evidence, including independent research conducted by IFF Research and Frontier Economics, suggests the public sector reform has been successful in improving compliance without creating disruption to the sector, or to its use of contingent labour. Revenue collected shows that since 2017, compliance with the existing off-payroll working rules has improved.

This approach is now being extended to large and medium organisations across all sectors. The Government has consulted extensively on the reform to the off-payroll working rules and its extension to all sectors, including by drawing on the public sector experience. We have also listened carefully to affected individuals and stakeholders. In response to feedback, the Government announced at Budget 2018 that the reform would not apply to engagements with the 1.5 million smallest businesses and would be introduced from April 2020, providing medium and large engagers 18 months to prepare.

This is about making sure the right tax is paid from 2020 onwards. HMRC will only use information resulting from these changes to open a new enquiry into earlier years if there is reason to suspect fraud or criminal behaviour. Contractors who are following the existing rules will feel little impact, and the off-payroll working rules do not affect the self-employed. No-one will be prevented from working through a company if it suits them.

Support for Business
HM Revenue and Customs (HMRC) are working hard to ensure that everyone affected by the change can access the support they need to get it right. Since Budget 2018 HMRC have
• published information on the detailed design of the reform in response to a 12 week consultation;
• published draft legislation and published detailed guidance on how businesses and intermediaries can prepare for the change and set up dedicated teams to provide education and training;

Ahead of implementation, HMRC are also:
• offering one-to-one support to more than 2,000 of the UK’s biggest employers;
• writing to all medium-sized businesses;
• providing workshops, online learning, round tables, online learning;

Finally, HMRC are also making enhancements to the online Check Employment Status for Tax (CEST) tool to make it more user-friendly in response to stakeholder feedback.

HMRC are encouraging engagers to use the existing CEST, and they will stand by the decisions it makes. For the more complex cases, customers are able to access detailed guidance or call HMRC’s dedicated helpline for one-to-one support.

The Government values the contribution of flexible workers to the UK economy, but it is also under an obligation to ensure fairness between individuals who work in a similar way.


HM Treasury