The UK government is facing calls from campaigners to end an anomaly in IR35 legislation which has led to some freelancers paying a double tax. The anomaly means that HMRC sometimes fails to account for tax already paid when it calculates liability owed for non-compliance.
If the tax authority finds that an organisation has made an error in judging the status of off-payroll workers, then the employer is liable for national insurance (NI) and tax that should have been deducted from the worker’s fee if the correct status had been applied.
The anomaly can see HMRC get paid more than it is due if the worker has already paid NI and tax on the same income at the time that they were initially judged to be working outside of IR35. A consultation on this loophole ended weeks ago, but the government is yet to respond to its findings.
Campaigners are now urging the government to respond to the consultation and end the anomaly to ensure that freelance workers are being taxed the right amount for the work that they do.
Seb Maley, CEO of IR35 advisory Qdos, commented: “Time is of the essence with this. The consultation is closed, and the government must move quickly to end the double taxation of IR35, which sees HMRC collect much more than it’s owed. We’ve seen it time and time again when the government consults on something only to ignore the issue for years.”
“The longer IR35 is double taxed, the more risk-averse businesses are likely to be and the more damage done to the flexible workforce. It’s a relatively simple fix too. This is a fundamental flaw in this legislation – one that the government has been aware of for years and, amazingly, has done nothing about.”
