Second Report - Lessons from implementing IR35 reforms

Select Committee
Public Accounts Committee HC 60 25 May 2022
Report Status Government responded
Conclusions & Recommendations 22 items (13 recs)
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Government Response (AI assessment · 22 of 22 classified)
Accepted 7
Accepted in Part 6
Acknowledged 6
Not Addressed 3
Government response
Treasury minutes: Government response to the Committee of Public Accounts on the Second report from Session 2022-23 · published 2 Sep 2022
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Recommendations & Conclusions

6 results
5 Recommendation Accepted in Part
HMRC has not made a robust assessment of the additional costs of implementing the reforms.
Recommendation
HMRC has not made a robust assessment of the additional costs of implementing the reforms. HMRC states that the IR35 reforms increased tax revenues by increasing the number of people employed for tax purposes, but it is unclear to what … Read more
Government Response Summary
The government agrees to produce and present to Parliament a cost-benefit analysis of the reforms, but states that, based on current data, it does not believe it will be possible to publish a full cost-benefit analysis taking account of all parties in the supply chain.
HM Treasury
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7 Recommendation Accepted in Part
We asked HMRC what level of non-compliance it expected there to be in smaller public...
Recommendation
We asked HMRC what level of non-compliance it expected there to be in smaller public bodies, and whether well-resourced departments struggling to comply is a worrying sign for the reforms more generally. HMRC suggested that smaller organisations may be better … Read more
Government Response Summary
The government agrees with the committee's recommendation to support compliance but rejects the specific approach of developing an overall estimate of non-compliance. Instead, HMRC will expand its work to obtain customer insight and will consider additional support based on these findings, with a target implementation date of December 2023.
HM Treasury
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11 Recommendation Accepted in Part
Evidence received from stakeholders indicated that many of the challenges with IR35 stem from underlying...
Recommendation
Evidence received from stakeholders indicated that many of the challenges with IR35 stem from underlying issues in tax administration.19 HMRC told us that it would be simpler and more straightforward to administer the tax system if tax liabilities of employed … Read more
Government Response Summary
HMRC has already implemented a process to reduce the circumstances where it collects tax twice and has set up a working group to consider a legislative solution to account for taxes already paid. HMRC will notify the Committee of a target implementation date as soon as this work has concluded.
HM Treasury
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14 Recommendation Accepted in Part
Furthermore, the current legal framework does not let HMRC offset liabilities for non- compliance against...
Recommendation
Furthermore, the current legal framework does not let HMRC offset liabilities for non- compliance against any taxes already paid by workers and their PSCs.24 In law, HMRC must collect the full taxes that should originally have been paid from the … Read more
Government Response Summary
HMRC has already implemented a process to reduce the circumstances where it collects tax twice and has set up a working group to consider a legislative solution to account for taxes already paid. HMRC will notify the Committee of a target implementation date as soon as this work has concluded.
HM Treasury
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21 Recommendation Accepted in Part
There is also not a complete picture of the costs of the reforms against which...
Recommendation
There is also not a complete picture of the costs of the reforms against which the benefits could be compared. HMRC has estimated the cost to hiring organisations, but its modelling is based on a theoretical minimum needed to comply, … Read more
Government Response Summary
HMRC will share with the Committee and publish analysis setting out the estimated actual amount spent to comply with the reform by client organisations, alongside estimated additional receipts generated from the reform, but does not believe it will be possible to publish a full cost-benefit analysis taking account of all parties in the supply chain.
HM Treasury
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22 Recommendation Accepted in Part
HMRC does not have estimates for the costs incurred by organisations other than hiring bodies.
Recommendation
HMRC does not have estimates for the costs incurred by organisations other than hiring bodies. The government introduced the reforms because it considered it too costly for HMRC to oversee an effective compliance regime with each individual PSC.49 It is … Read more
Government Response Summary
The government agrees to produce and present to Parliament a cost-benefit analysis of the reforms, but states that, based on current data, it does not believe it will be possible to publish a full cost-benefit analysis taking account of all parties in the supply chain.
HM Treasury
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