The Institute of Chartered Accountants in England and Wales (ICAEW) has urged Government not to use the Finance Bill 2019-21 to introduce the draconian Off-Payroll Tax to the private sector.
Instead, the organisation’s Tax Faculty argues that the delay provides an opportunity for Government to reflect on the detail of the measures and to conduct a comprehensive review into the taxation of the self-employed.
The Tax Faculty’s recommendations echo the sentiments of the recent House of Lords Finance Bill Sub-Committee report, which offered a scathing review of the Off-Payroll Tax before calling for an overhaul of the self-employed taxation system.
Despite the March 2020 announcement of a 12-month delay to the legislation due to the coronavirus outbreak, Government recently signalled its intent to avoid any further postponement by including the proposals in the second reading of the Finance Bill in April.
ICAEW warning highlights numerous points of contention
In its latest representation, the ICAEW’s Tax Faculty flags up numerous issues that require addressing before the Off-Payroll legislation can be considered fit for purpose, including:
- The unlawful imposition of employer’s National Insurance Contributions (NICs) liabilities on ‘inside IR35’ contractors
- HMRC’s approach towards dealing with non-compliance by hirers and agencies
- The alignment of employment status for tax and statutory employment rights purposes
“The inherent flaws in the Off-Payroll Tax highlighted by the ICAEW are nothing new, but they reaffirm the urgent requirement for the legislation to be repaired while Government has the chance,” comments ContractorCalculator CEO Dave Chaplin.
“Unlike Government, the ICAEW has acknowledged that there is no point putting an amendment into statute at such a premature stage when the legislation is riddled with problems.”
Labour needs to harness Off-Payroll opposition, says Chaplin
Though there is resistance to the Off-Payroll extension within Government, more is needed to prevent a damaging premature rollout. An amendment tabled last month by Conservative MP David Davis calling for a further postponement until 2023-24 disappointingly failed to gain the support of the Labour Party.
After the subsequent House of Commons debate, Financial Secretary to the Treasury, Jesse Norman, dismissed numerous valid concerns raised by MPs, insisting: “It’s hard to see any genuine rationale for any further delay.”
But while the ICAEW’s recommendations are likely to fall on deaf ears amongst key decision makers, Chaplin notes that opposition to the legislation from a growing number of Conservative MPs could provide Labour with an opportunity to inflict a damaging blow to the Tory Government:
“There is a group of Conservative MPs who have listened to their contractor constituents and who are in favour of a further delay. If Labour were to support a postponement, an amendment could feasibly be added to the Finance Bill before the end of June, at Report Stage.”
Chaplin concludes: “The door is open for Sir Keir Starmer to inflict his first real hammer blow to Johnson’s Government. The Labour Party need to wake up and react accordingly before the opportunity passes them by.”