IR35: HMRC calls for comments on its latest proposals for off-payroll workers

HMRC has launched a technical consultation on its latest draft regulations for off-payroll workers (IR35). These rules apply where an individual is engaged through a personal services company for an end client but is working like an employee and HMRC views they should pay tax as an employee. ?

The regulations provide a formal mechanism for tax paid by the off-payroll worker under self-assessment to be offset against the tax that would be paid under assessment by the end client under PAYE. This was historically done on a non-statutory basis (requiring the consent of all involved – which sometimes proved difficult), but is now being formalised.

Where HMRC applies a set-off against the deemed employer's PAYE liability, it will issue a direction notice to all affected parties setting out the relevant tax year and the amount of the set-off. HMRC hopes that the mechanism will ensure that it collects the right amount of tax.

The relevant individual or intermediary will have the right to appeal against a direction notice within 30 days of issue on limited grounds, including that:

• They did not receive the payment which the direction notice refers to
• No tax was paid on the relevant payment
• The amount included in the notice is incorrect
• There was no "trigger event" such as HMRC serving a determination that includes tax in respect of the deemed direct payment (PAYE determination).

Although the deemed employer in the scenario will have no right to appeal against the direction notice, they can appeal the PAYE determination issued to them.

If you would like to discuss these draft regulations or your IR35 status more generally, please reach out to Matthew Sharp and me. You may also wish to have a look at our IR35 status determination tool here.