HMRC accused of attempting to ‘dodge’ it’s own off-payroll rules

In an ironic turn of events, HM Revenue & Customs (HMRC) has reportedly been accused of attempting to ‘dodge’ it’s own controversial off-payroll rules by routing it’s limited company IT contractors through an external company – allegedly in a bid to bypass IR35.

In April 2017, HMRC notoriously introduced legislation stipulating that the responsibility to determine the IR35 status of contractors in the public sector must be decided by the end client.

However, the Tax Authority has recently been accused of taking advantage of an exemption in the new rules for private companies that undertake functions.

This exemption applies to consultancies if they are able to prove that their contract with a public authority such as HMRC supplies ‘services’ rather than people or labour, meaning that a consultancy providing a ‘service’ to HMRC can effectively be deemed out of the scope of IR35.

In short, this allows for a private sector provider offering a public sector function to be exempt from the off-payroll rules.

According to reports, HMRC has refused to state whether it has used private software firm RCDTS since the new rules took effect in April, and has also refused to clarify the nature of any services it has outsourced since April.

In essence, some believe that PSCs who were working for HMRC before April have quit, only later to return to HMRC projects via another company such as RCDTS.

Some critics and experts have accused the tax authority of attempting to dodge it’s own controversial off-payroll rules, while others have supported the Revenue’s bid to help genuinely self-employed contractors to gain access to contracts quickly and directly.

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