News that the government has launched a consultation to address the ‘double taxation’ of IR35 under the off-payroll working rules has been universally welcomed.
The consultation, launched today, will explore ways HMRC can account for taxes already paid by a contractor when calculating the tax liability owed by a business in the event of non-compliance.
As things stand, HMRC does not factor in the tax already paid by the contractor during the engagement. It means businesses (which are liable for IR35 under the off-payroll working rules) are overtaxed, should HMRC find non-compliance.
The consultation will run for 8 weeks, until 22nd June.
Qdos CEO, Seb Maley, commented: “This is potentially game-changing. The double-taxation of IR35 under the off-payroll rules is a massive problem. HMRC doesn’t offset the tax already paid by a contractor when handing a business a tax bill. Put differently, it means HMRC collects much more than it should. It’s morally wrong.
“A consultation marks progress. In theory, it’s an issue which can and should be solved relatively easily too. Even so, I’m amazed that the government has refused to look into this until now. Westminster knew this was a problem some time ago, but has done nothing about it.
“The double taxation of IR35 gives needlessly risk-averse businesses another reason not to engage contractors – because if they’re found to be non-compliant, HMRC will over-tax them.”