HMRC recently updated its guidance on off payroll working compliance for employers.

The new guidance sets out ‘practical steps’ for organisations to follow. It affects employers who are responsible for operating off payroll working rules and who engage workers who provide their services through their own intermediary.

The guidance states that organisations should apply the new guidelines to ‘reflect the complexity and scale of their own off payroll working engagements‘. It said that the guidelines should be used to ‘help make informed decisions based on individual circumstances’.

The guidance also outlines a change in policy that could affect organisations with an open compliance check as part of the reformed IR35 rules. This was initially announced at the Autumn Statement on 22 November last year.

From 6 April 2024, HMRC will take into account the taxes a worker or their intermediary have already paid against the amount the deemed employer owes. This change applies to income tax and National Insurance contributions (NICs) assessed by HMRC on or after 6 April 2024 from off-payroll working errors in payments since 6 April 2017.

Internet links: GOV.UK

The changes to National Insurance contributions (NICs) announced by Chancellor Jeremy Hunt in the Autumn Statement will help to ‘ease the burden on strivers up and down the country‘, according to the Federation of Small Businesses (FSB).

Mr Hunt used his Autumn Statement speech to cut the main rate of employee NICs from 12% to 10% for 27 million workers across the UK. This is set to take effect from 6 January 2024. The Chancellor said that, for the average employee earning £35,400 per year, the change amounts to a £450 annual tax cut. 

For the self-employed, the Chancellor also abolished Class 2 NICs and cut Class 4 NICs from 9% to 8%, effective from 6 April 2024.

Tina McKenzie, Policy Chair at the FSB, said:

‘The Chancellor’s decision to reduce the rate of self-employed NICs and abolish the Class 2 element is extremely welcome, easing the burden on strivers up and down the country.

‘The FSB has long campaigned for the abolition of the Class 2 element of NICs and the reduction of Class 4, and we are therefore pleased that the Chancellor has acted.’

Internet link: GOV.UK FSB website

The changes to National Insurance contributions (NICs) announced by Chancellor Jeremy Hunt in the Autumn Statement will help to ‘ease the burden on strivers up and down the country‘, according to the Federation of Small Businesses (FSB).

Mr Hunt used his Autumn Statement speech to cut the main rate of employee NICs from 12% to 10% for 27 million workers across the UK. This is set to take effect from 6 January 2024. The Chancellor said that, for the average employee earning £35,400 per year, the change amounts to a £450 annual tax cut. 

For the self-employed, the Chancellor also abolished Class 2 NICs and cut Class 4 NICs from 9% to 8%, effective from 6 April 2024.

Tina McKenzie, Policy Chair at the FSB, said:

‘The Chancellor’s decision to reduce the rate of self-employed NICs and abolish the Class 2 element is extremely welcome, easing the burden on strivers up and down the country.

‘The FSB has long campaigned for the abolition of the Class 2 element of NICs and the reduction of Class 4, and we are therefore pleased that the Chancellor has acted.’

Internet link: GOV.UK FSB website

The tax cuts announced in the 2023 Autumn Statement won’t prevent tax revenues rising to their highest ever levels, the Institute for Fiscal Studies (IFS) has warned.

The IFS stated that announcing tax cuts in response to ‘highly uncertain’ changes in assumptions about the UK’s medium-term economic prospects ‘does not feel like a recipe for good management of the public finances‘.

It also acknowledged that the Chancellor’s cuts to the rates of National Insurance contributions (NICs) put money back into the pockets of 27 million workers. However, it said the bigger picture means that the changes give backless than £1 of every £4 that has been taken away from households through changes to NICs and income tax announced since March 2021.

However, the business group did welcome the Chancellor’s decision to make Full Expensing permanent but noted that the move indicates that the Autumn Statement was an event focused on medium-term growth.

Paul Johnson, Director of the IFS, said:

‘The growth outlook has weakened. Inflation is expected to stay higher for longer. Higher inflation pushes up tax receipts by more than it pushes up spending on debt interest or social security benefits.

‘His immediate cut to national insurance will put more money into workers’ pockets when it comes in but won’t be enough to prevent this from being the biggest tax-raising parliament in modern times. These cuts will also not stop tax revenues rising to their highest ever levels.’

Internet link: IFS website

HMRC is ‘Making Tax Difficult’ for taxpayers as Making Tax Digital (MTD) adds to the burdens they face, according to a report by the Public Accounts Committee (PAC).

The report says that HMRC has lost sight of the need to put taxpayers at the heart of changes to the tax system.

The PAC says that HMRC is increasing the burdens imposed on some taxpayers through the MTD initiative. It said that in seeking further investment in MTD, HMRC has not been transparent enough about the ‘substantial costs’ MTD will impose on many taxpayers.

According to the Committee, the design of MTD fails to take into sufficient account the realities facing business taxpayers and agents.

It said that while MTD will ‘substantially benefit’ HMRC by improving its systems, taxpayers are asked to spend more and do more in order to be compliant.

The report revealed that HMRC excluded more than £2 billion in upfront transitional MTD costs for taxpayers from its 2022 and 2023 business cases for the scheme. It also found that ‘widespread and repeated‘ failures in HMRC’s planning, design and delivery of MTD have led to increased costs and delays to the initiative.

Meg Hillier, Chair of the PAC, said:

‘When reporting on proposals for digitalising the tax system, our committee should not have to be recommending that HMRC start with what taxpayers need – in an ideal world, one would hope this would simply go without saying. But seven years and £640 million into the MTD programme, we are concerned HMRC is also succeeding in making tax difficult.’

Internet link: Parliament website