Recap – Looking back at 2023
As we step into 2024, let’s take a reflective journey through the pivotal events that defined the landscape of 2023. Amidst the dynamic tapestry of developments, HMRC took centre stage by reaching out to private sector businesses for investigations into Off-payroll working rules, initially focusing on the transport and distribution industry. The intricacies of their investigative process became apparent, underscoring the importance of streamlined procedures to meet stringent deadlines. For a comprehensive understanding of this process, delve into our blog on HMRC Investigations.
Meanwhile, HMRC unveiled plans to introduce an “off-set” mechanism for end clients, scheduled for legislation in the Autumn Statement 2023. This mechanism empowers HMRC to reduce the PAYE liability of an employer (end client or agency) to accommodate taxes paid by the worker and their limited company in case of errors in applying off-payroll working rules. This transformative measure significantly mitigates the financial risks associated with engaging limited company contractors. It opens the door for a potential reassessment of policies related to personal service companies, potentially signalling the end of blanket bans on PSCs or blanket ‘inside’ IR35 determinations.
In tandem, the much-needed umbrella regulation aimed to create a fair playing field, particularly in addressing tax avoidance and unethical practices impacting umbrella employees. Despite a recent consultation during the summer (similar to the off-payroll consultation), the absence of an update suggests a potential delay in the legislation until after the upcoming General Election.
The Autumn Statement 2023 also introduced tougher consequences for promoters of tax avoidance schemes, prevalent in the contractor sector. Notable changes include a new criminal offence for those persisting in promoting avoidance schemes after receiving a stop notice and HMRC’s new power to bring disqualification action against directors involved in promoting tax avoidance. While we welcome these changes, we advocate for further progress specifically addressing the regulation of umbrella companies.
Anticipating the shifts in 2024, these regulatory changes are expected to usher in a transformative period:
- Reduced Financial Risk: The alterations in outside IR35 determinations are poised to halve the financial risk, reducing it to 15-20% of the assignment rate.
- Reduction in Blanket Bans: Clients may become more open to managing IR35 correctly, potentially reducing the prevalence of blanket bans.
- Market Shift: A likely move back to Personal Service Companies (PSC) from Umbrella structures is on the horizon.
As we embark on this new year, these changes signify a transformative period in the contractor sector. If you have any questions about blanket bans, Book your Free 1 Hour Legal Consultation with our team before Friday 29th March!