Key tax updates post-Budget - IR 35 reviews and employee work status
As widely expected, the Government announced that there will be consultation on reforming the off-payroll working rules (more commonly referred to as IR35) for those contractors operating in the private sector.
This follows on from the reforms introduced in April this year for engagements in the public sector whereby the decision about a contractor's employment status, together with the liability for operating tax on the contractor's fees, moved to the public sector body.
The Government stated that "public sector compliance is increasing as a result, and therefore a possible next step would be to extend the reforms to the private sector, to ensure individuals who effectively work as employees are taxed as employees even if they choose to structure their work through a company."
The consultation document is expected to be published in early 2018. Those individuals who are currently contracting in the private sector, via their own personal service companies, should be watching this area with interest.
The Government has also announced that it will be publishing a discussion paper to "explore the case and options for longer-term reform to make the employment status tests for both employment rights and tax clearer." This is a complex area and is recognised as such by the Government which has vowed to "work with stakeholders to ensure that any potential changes are considered carefully."