UK requires new approach for business to deal with tax non-compliance issues, says CIOT

The Chartered Institute of Taxation (CIOT) says that the UK's new IR35 income tax and National Insurance contributions legislation requires a new approach for businesses dealing with non-compliance issues.

The income tax and NICs legislation will affect anyone working through an intermediary for an organisation, such as a Personal Service Company (PSC).

IR35 application

Under IR35 rules, payments to an intermediary will be treated in the same way as a part of a worker's employment income. Therefore, tax and NICs will have to be paid by the intermediary involved.

The aim is that a similar amount of tax and NICs will be paid as if a worker was in direct employment.

Fast and loose

The chairman of the CIOT's Employment Taxes Sub-Committee, Colin Ben-Nathan, said: "It is clearly wrong that some people get away without paying the correct amount of tax and NICs because they are playing fast and loose with IR35 either through ignorance of the rules or deliberate non-compliance.

"In our view HMRC needs to give greater publicity to their successes in IR35 cases to increase awareness of the rules and where they suspect outright evasion then clearly they should come down hard on those involved."

A recent HMRC discussion document mooted that the IR35 compliance obligation should be transferred away from workers and their PSC, and instead should lie with the organisation they are actually working for.

The CIOT said that it currently has concerns about organisations being overcautious and deducting tax and NICs and then "leaving it to the worker and HMRC to sort out the mess."