The Institute of Chartered Accountants of England and Wales are the latest body to question the fairness and effectiveness of the new off payroll rules in the public sector. For those of us that have worked with PSCs in the public sector this does not come as a surprise.
The most common issues have been:
- Public sector bodies wrongly categorising all workers as inside IR35 presumably because they do not trust the online employment status tool (EST)
- Accountants failing to understand the new rules particularly the calculation of VAT
- Accounting software being unable to deal with 'deemed' employees both in terms of tax deductions and RTI reporting
Nevertheless HMRC has reported to Treasury that the new measures have been a success and that teething problems have been overcome. In our opinion they have failed to properly report the problems that occurred and the workload that was created for the public sector, recruitment businesses and accountants.
The financial impact on PSCs is also significant although HMRC would argue that they are now paying their fair share of tax. The ICAEW's letter to the Treasury is therefore particularly welcome a copy of which can be downloaded here.
Perhaps its most significant comment is that 'HMRC's check employment status tool (CEST) is not suitable for use in the private sector. HMRC has stated that CEST does not cover all scenarios, including the mutuality of obligations master and servant test, and that the tool was designed based on public sector contracts. Further, there are also no rights of appeal for individual workers who disagree with the CEST status decision.' For those PSCs working in the private sector this is a welcome intervention.