Employment status rule changes

HMRC have published draft secondary legislation making amendments to Regulation 72E and F of the Income Tax (Pay As You Earn) Regulations 2003 in relation to the administration of the re-categorisation of workers" employment status from self-employed to employed, for comment by 9 March 2014 say Harris & Co accountants Northampton

This follows the need to ease substantial administrative burdens imposed by current PAYE Regulations on employers and HMRC in the event where the employment status of a large numbers of workers" has been re-categorised by HMRC from self-employed to employed.

Current PAYE Regulations provide that HMRC may recover tax from an employee rather than an employer where it appears an amount intended to represent tax on the PAYE income has been self-assessed or paid on account, but they require HMRC to, amongst other things, serve a notice on each individual concerned setting out each affected year and the tax paid in each year.

The proposed changes to Regulations 72E and F aim to reduce the burden on employers and HMRC by permitting the serving of notices by HMRC on individuals, but providing an option as to whether to include details of the amounts offset and the tax years they refer to, or to only state the employment to which the notice applies. The changes will also enable HMRC, in certain circumstances, to undertake a sampling exercise to extrapolate an amount by which the tax due from the employer will be reduced.

The amendments to the legislation are proposed to come into effect from 6 April 2014.