Search the ETC Tax Website

Request a callback

Callback Request

Please provide as much detail as possible in regards to the reason for your enquiry so our tax advisers can prepare and tailor their response to reflect your needs. We will endeavour to call you back to discuss your enquiry and you will not be charged for this time.

  • Sign-up to our newsletter

    Newsletter Main Form

  • IR35 Legislation; HMRC Mulls Challenges to Referees

    26 September 2018

    Andy Wood


    Regular readers of this ‘blog will be familiar with how the off-payroll working rules known as IR35 have become something of a football between HMRC and the UK’s burgeoning community of contractors.

    Introduced by the then Chancellor of the Exchequer, Gordon Brown, in 2000, the rules were meant to simplify the tax status of individuals working through a Personal Service Company (PSC), such as a limited company.

    They had been brought in because of concerns that some self-employed had been failing to pay correct levels of Income Tax and National Insurance Contributions (NICs)

    Despite intending to improve matters, IR35 is not only regarded as overly complex (by contractors) but as having failed to effectively tackle the problem (by HMRC).

    In April last year, the Revenue attempted to address the issue by imposing new arrangements on the public sector which required authorities using the services of contractors both to determine whether those individuals fell within the scope of IR35 (and should, therefore, be taxed as employees) and hand over to the Revenue all taxes which might be due as a result of any such decision.

    That reform resulted in a windfall of £410 million for the Treasury and the realisation that the shift in onus might help close an annual shortfall in Income Tax and National Insurance Contributions (NICs) which HMRC claims is due from contractors working with private sector businesses, an amount it estimates might swell to £1.2 billion by 2023.

    Earlier this year, it launched a consultation about how best to improve IR35 compliance in the private sector (read more).

    Among the proposals thrown open for broader comment was the extension of the public sector changes to private sector businesses, something which would have significant ramifications for companies affected.

    The desire to close another chunk of the so-called ‘tax gap‘ may not have been the only motivation.

    Nor is the rate at which Britain’s army of self-employed is increasing the sole factor. The Office of Budget Responsibility reckons that between the introduction of the off-payroll rules in 2000 and 2015, the number of small companies with one or two directors rose from about 250,000 to more than one million.

    HMRC will also have been conscious of its poor record in enforcing IR35. Over the course of the last decade, it has won case based on allegations of insufficient Income Tax and National Insurance Contributions (NICs) being paid by a contractor (source).

    That success rate hasn’t exactly been helped with another reverse at the hands of the body representing football referees.

    The Revenue had attempted to recover some £584,000 from 60 match officials who generally take charge of games below Premier League level on the grounds that they were employees of the Professional Game Match Officials Limited (PGMOL), the body which represents referees in England.

    However, a tax tribunal has now decided that the officials are, in fact, self-employed and, therefore, fully entitled to pay a lower rate of National Insurance Contributions (NICs) (source).

    The Revenue is seeking to take the case into extra time by announcing that it would be deliberating on the outcome before appealing or not.

    It is undoubtedly, though, a setback and one which provides added imperative for a resolution of how IR35 applies in the private sector.

    Enterprise Tax Consultants can advise on all aspects IR35

    Tax advice services include tax advice for companies & individuals.

    Read more about IR35 and personal service companies here, or check out this post on how British SME growth is being chocked by similar red tape and be sure to check out further SME articles & tax advice below.