A report was published last month by The House of Commons Public Accounts Committee which states “structural problems remain with the way IR35 operates in practice”.
It has been suggested that HMRC rushed implementation of the reforms and provided poor guidance. In addition, public bodies struggled with their tool ‘CEST’ to assess status. Due to this, it has become apparent that many central government departments found it difficult to comply with the IR35 reforms and therefore expected to owe HMRC a total of £263 million in back-taxes.
MP’s have made several recommendations including asking HMRC to develop a robust estimate of non-compliance for the public sector and use this to identify areas where it can reduce the inherent challenge of complying with the reforms, for example by improving its guidance and tools.
The PAC also suggests HMRC should take action to identify and work with sectors that have been particularly affected to help understand the challenges of the changes, establish how to address them, and ideally make it easier to comply.
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