The government recently announced its draft legislation for the next Finance Bill, which includes new off-payroll rules, as well as other policies to ensure a “competitive and fair tax system”.
However, it has already been met by a lot of criticism by those who say it requires improvements if it is to be successful.
Last week, the draft Finance Bill was published, which revealed plans for large digital businesses to pay a new Digital Services Tax due to the increasing value they are able to derive from British citizens these days. This idea was first introduced in the Budget 2018, but the government has reassured small businesses and those making losses, it will only affect larger organisations.
Financial secretary to the Treasury and Paymaster General Jesse Norman said: “The UK has always sought to lead in finding an international solution to taxing the digital economy.”
He added: “This targeted and proportionate Digital Services Tax is designed to keep our tax system in this area both fair and competitive, pending a longer term international settlement.”
The government also stipulated that more of the taxes paid by employees and customers to businesses that become insolvent will go to public services, instead of being given to financial institutions.
The draft legislation will be open for consultation until September 5th, and will be included in the next Finance Bill if approved.
The final point in the legislation highlighted the issue of off-payroll working rules. It stated that two people working in similar roles for the same employer will be made to pay the same employment taxes.
While the government’s intentions seem positive, the Chartered Institute of Taxation (CIOT) is just one of the organisations that believe there are still concerns surrounding the proposals.
Chair of the CIOT’s Employment Taxes Sub-committee Colin Ben-Nathan said changes to the HMRC’s Check Employment Status for Tax (CEST) need to be made.
“If businesses are to make the correct decisions on whether the off-payroll rules apply then CEST will need to be significantly improved,” Mr Ben-Nathan stated.
He added that the government is only planning to roll out changes to enhance CEST just before the new off-payroll rules are introduced in April 2020.
“However, businesses are already making decisions on contracts and projects that will extend beyond next April and they, and their contractors, need to know urgently how those contracts will be taxed from April 2020,” commented Mr Ben-Nathan.
Therefore, improvements to CEST need to be made by “October 2019 at the latest”.
In addition to this, members of the Association of Taxation Technicians (ATT) stated that the extension of the rules from the public to the private sector is “welcome”.
Michael Steed, co-chair of the ATT’s Technical Steering Group, said it will provide more transparency to the process, and subsequently “reduce the risk of incorrect or blanket status decisions being taken”.
However, he went on to say “there remains much work to be done to ensure that private sector engagers, agencies and those working through personal service companies are both aware of the changes and ready for them by April 2020”.
To help keep up to date with taxation changes, consider using our payroll software that makes the calculations automatically for you.