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MPs urge caution over IR35 tax reforms

MPs have issued a warning to the government that it needs to keep a close eye on the upcoming IR35 reforms to the tax system, and how they affect private companies.

These changes were brought in for public sector firms two years ago and are due to hit those in the private sector next year, but they have met with a mixed response from business owners and contractors. The aim of the reforms is to prevent people avoiding tax by using personal service companies and they put the burden of establishing tax status onto the company that hires a contractor rather than that individual.

However, during a recent parliamentary debate, some MPs accused the government of failing to take on board the lessons from the rollout to public sector firms and argued that these lessons were not influencing the current consultation. They also stated that the online tool for checking tax status provided by HMRC was not fit for purpose.

This Check for Employment Status for Tax (CEST) test has been criticised for delivering inaccurate results, with Paul Sweeney, a Labour MP, stating:

“Given that HMRC loses the vast majority of IR35 cases in court, how can it adequately educate and prepare the entire private sector to accurately assess the status of the contingent workforce?”

John Glen, the Treasury minister responded by saying that CEST would continue to be reviewed and adjusted before the rollout. Seeking advice on their tax return from accountants will also help companies ensure they comply.

Posted by Peter
April 16, 2019
IR35

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