Draft Finance Bill and IR35: A tale of the very much expected
Following the publication today of the government’s draft Finance Bill, Nigel Morris, Our Employment Tax Director says while the government has provided some clarity for concerned workers and companies, there’s still can-kicking going on:
“The draft legislation confirms the roll out of IR35 to the private sector will in essence mirror the roll out to the public sector, but certain issues remain frustratingly unresolved.
“The draft finance bill gives some welcome clarity on the definition of “small” for an unincorporated body, namely the turnover limit defined in the Companies Act, currently £10.2m per annum, as well as specifying that all businesses are “small” in their first year.
“However, this seems inequitable for incorporated businesses who are only classified as small if they meet two of the three criteria relating to Turnover, Assets and Employees. An incorporated business could be caught by the new rules if they have 51 employees, where an unincorporated business wouldn’t, even if it had 100 employees.
“The draft also defines the proposed client-led status disagreement process. If a worker disagrees with a status determination, the client is required to review the decision within 45 days and either change it, or confirm that it is correct and provide the reasons. However it does not go on to say what happens if the worker is still not satisfied. So, it just kicks the can down the road for another 45 days. We would like to see HMRC agree that at this stage they would step in to arbitrate.
“The jury is still out on the review of the Check Employment Status Tool (CEST) which has been given a vote of ‘no confidence’ by the profession. It will be an important tool for those involved with IR35 yet no update was provided today.”
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