HMRC has published for consultation the much-anticipated draft regulations setting out how it will transfer and recover unpaid PAYE liabilities from other parties in labour supply chains once the off-payroll (IR35) changes come into effect on 5 April 2020.
The draft primary legislation which will reform the off-payroll regime was published in July 2019 for inclusion in Finance Bill 2020. One of the major risks for engagers under the new rules is that the end client could become secondarily liable to account to HMRC for tax and NICs where there is a failure by an entity further down the labour supply chain to meet its IR35 obligations. The draft Income Tax (Pay As You Earn) (Amendment) Regulations 2020 and draft Social Security Contributions (Intermediaries) (Miscellaneous Amendments) Regulations 2020 contain the PAYE and NICs related amendments, setting out the mechanics of HMRC’s power of recovery from end clients.
Under the draft regulations, HMRC will only be able to recover income tax and NICs from the end client (i.e. the highest entity in the supply chain) in situations where the UK-based agency (the deemed employer, treated as making a payment of earnings to the worker’s intermediary) has failed to make PAYE deductions from payments made in relation to an off-payroll worker and there is, according to HMRC, ‘no realistic prospect’ of recovering the outstanding income tax from the deemed employer ‘within a reasonable period’. HMRC must issue a recovery notice in order to transfer the debt and has two years in which to issue such a notice. The recipient of the recovery notice has the right to appeal on certain grounds, as specified in the draft regulations.
The technical note that accompanies the draft regulations states HMRC will not exercise this transfer of debt power in the case of ‘genuine business failure’ of the party ordinarily liable to account for PAYE and NICs. There is no explanation as to what constitutes a ‘genuine business failure’.
The draft PAYE regulations also provide for the reporting of an off-payroll worker indicator on PAYE real time information (RTI) returns.
The draft NICs regulations broadly mirror the PAYE position, albeit they are lengthier given these represent the first draft amendments to any NICs provisions ahead of the April 2020 changes.
The consultation on the draft regulations closes on 19 February 2020. See bit.ly/2uJH2GM.
HMRC has published for consultation the much-anticipated draft regulations setting out how it will transfer and recover unpaid PAYE liabilities from other parties in labour supply chains once the off-payroll (IR35) changes come into effect on 5 April 2020.
The draft primary legislation which will reform the off-payroll regime was published in July 2019 for inclusion in Finance Bill 2020. One of the major risks for engagers under the new rules is that the end client could become secondarily liable to account to HMRC for tax and NICs where there is a failure by an entity further down the labour supply chain to meet its IR35 obligations. The draft Income Tax (Pay As You Earn) (Amendment) Regulations 2020 and draft Social Security Contributions (Intermediaries) (Miscellaneous Amendments) Regulations 2020 contain the PAYE and NICs related amendments, setting out the mechanics of HMRC’s power of recovery from end clients.
Under the draft regulations, HMRC will only be able to recover income tax and NICs from the end client (i.e. the highest entity in the supply chain) in situations where the UK-based agency (the deemed employer, treated as making a payment of earnings to the worker’s intermediary) has failed to make PAYE deductions from payments made in relation to an off-payroll worker and there is, according to HMRC, ‘no realistic prospect’ of recovering the outstanding income tax from the deemed employer ‘within a reasonable period’. HMRC must issue a recovery notice in order to transfer the debt and has two years in which to issue such a notice. The recipient of the recovery notice has the right to appeal on certain grounds, as specified in the draft regulations.
The technical note that accompanies the draft regulations states HMRC will not exercise this transfer of debt power in the case of ‘genuine business failure’ of the party ordinarily liable to account for PAYE and NICs. There is no explanation as to what constitutes a ‘genuine business failure’.
The draft PAYE regulations also provide for the reporting of an off-payroll worker indicator on PAYE real time information (RTI) returns.
The draft NICs regulations broadly mirror the PAYE position, albeit they are lengthier given these represent the first draft amendments to any NICs provisions ahead of the April 2020 changes.
The consultation on the draft regulations closes on 19 February 2020. See bit.ly/2uJH2GM.
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