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2022: A Year in Compliance and Legislation

As we near the end of 2022, Stonebridge has reviewed the past year in compliance and legislation…there was a lot to get through!

  • Jan: 10.2 million customers filed their 2020 to 2021 tax returns by the 31st January 2022 deadline.

  • Feb: The Government requested contribution to Call for Evidence on umbrella companies on the role they play in the labour market and how they interact with the tax and employment rights systems.

  • March: Rishi Sunak, the then Chancellor, announced a resource boost for HMRC to tackle non-compliance. This boost was said to enable HMRC staff to provide greater support to taxpayers seeking to pay off accrued tax debts and to tackle the most complex tax risks, ensuring large and mid-sized businesses pay the tax they owe.

  • April: IR35 soft landing came to an end on 6th April 2022. In Feb 2021, HMRC confirmed that there will be no penalties for the first 12 months of the new IR35 rules (unless there’s evidence of deliberate non-compliance), this was known as a “soft landing”.

  • April: MSC legislation makes headlines. Contractors were chased for “potentially tens of millions in tax” by HMRC who were suspicious that they are Managed Service Companies (MSCs), and their accountants are MSC providers.

  • May: HMRC won £140k tax case re IR35. The case involved Paul Hawksbee, a presenter on Talksport radio, who appealed an IR35 determination over a £140,000 tax bill relating to a three-year period at the radio station between 2012 and 2015.

  • June: The Government considered plans to allow agency workers to replace rail staff who are on strike. The move would require a law change after previous Labour government put a restriction on replacing striking staff with agency workers.

  • July: ‘Construction Industry Joint Council (CIJC)’, the body responsible for negotiating the industry’s pay and conditions, agreed to a 5% pay increase on a one-year pay deal for site workers covered by the Working Rule Agreement (WRA).

  • July: On 20th July, the Supreme Court dismissed an appeal by Harpur's Trust unanimously, making 12.07% formula for pro-rata holiday pay redundant. Holiday pay for casual but permanent workers was confirmed that it must now be calculated at 5.6 weeks of each week of pay.

  • Aug: Public Accounts Committee (PAC) criticised 'widespread non-compliance' with IR35 tax reforms. The PAC claimed there were “structural problems” that need addressing in terms of how the tax avoidance rules work in the public and private sectors.

  • Aug: The Government worked to repeal trade union laws that restrict employment businesses from providing temporary agency workers to fill vacant positions caused by staff striking. From the date of the law passing, businesses affected by industrial action were able to call upon skilled, temporary staff at short notice to plug essential positions.

  • Aug: HS2 faced a tax bill of £9.5m for errors made when implementing the off-payroll IR35 reforms. It was revealed that HS2 did not carry out employment status determinations on a number of contractors because they were supplied by a third-party provider.

  • Aug: Healthcare employment agency K5K were ordered to pay a £260,991.21 tax and National Insurance bill after its appeal regarding Section 44 legislation was dismissed at a First Tier Tribunal hearing.

  • Sep: Liz Truss became PM, taking over from Boris Johnson.

  • Sep: The Chancellor, Kwasi Kwarteng, delivered an explosive mini-budget in September in a massive shake-up of the UK's finances. This included repeal of 2017 and 2021 IR35 Off-Payroll Working Rules reform from April 2023.

  • Sep: The Retained EU Law (Revocation and Reform) Bill was introduced to Parliament on 22nd September 2022. The bill could impact employment rights such as the 48-hour working week, rest breaks and holiday pay, rights of employees when a business transfers under TUPE, and equality of treatment of part-time and fixed-term workers among many other rights.

  • Oct: From 1st October, employers were asked to use certified Identity Service Providers (IDSPs) in order to complete digital right to work checks for all British and Irish passport holders, as an alternative to undertaking the manual checks.

  • Oct: The Chancellor, Kwasi Kwarteng, confirmed that the additional rate of the 45% income tax for those earning over £150,000 would not be abolished.

  • Oct: The Chancellor, Kwasi Kwarteng was sacked and replaced by Jeremy Hunt. On 17th Oct, Hunt reversed all bar 3 of the mini-budget changes, including the repeal of IR35. HMRC expect that £2bn could be raised by this specific reversal alone meaning that not only did they clearly anticipate a large amount to be generated from repealing the repeal but at least within the current government, IR35 is not going anywhere any time soon.

  • Oct: Rishi Sunak became Prime Minister, replacing Liz Truss.

  • Nov: On 17th November, Hunt delivered the autumn statement, which included the 45% additional rate of income tax threshold will reduce from £150,000 to £125,140 from April 2023 and main income tax allowances and thresholds, national insurance thresholds plus inheritance tax nil rate bands will stay at current levels until April 2028.

  • Dec: The Administrative Burdens Advisory Board publishes 2022 annual report. Within the report ABAB confirmed that HMRC are “working very hard to improve the CEST to help businesses make a secure tax status determination” and that they look forward to seeing the improvements over the coming months.

Whilst it has been a turbulent year with lots of changes, one thing remains certain that clamp down on non-compliance and the recouping of tax is paramount to the current Government.

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