HMRC clarifies umbrella companies aren’t an off-payroll legislation ‘intermediary’

The taxman has clarified that he does not intend to catch umbrella companies with the definition of ‘intermediary’ inserted in his off-payroll rules, as anticipated on ContractorUK.

Citing s610 of Chapter 10 ITEPA, HMRC acknowledged that its proposed wording could “capture a wide range of companies providing a worker’s services” to an end-user.

The effect would be that the end-user would deduct tax before paying any such companies -- umbrellas, employers seconding employees, and even jobs agencies, HMRC said.

'Debacle'

Despite being behind the “confusion” and ensuing “debacle,” in the words of contractor body IPSE, the Revenue made the clarification while managing not to apologise.

However a spokesman for HMRC told ContractorUK: “We have engaged with stakeholders to understand their concerns about part of the off-payroll working legislation.

“[We have moved to] reassure them that the policy intention remains in line with our published guidance.

“We continue to work closely with stakeholders on this issue and are considering what action is required to ensure the rules apply as intended.”

'Almost certainly to involve primary legislation'

The Freelancer & Contractor Services Association, whose members include umbrellas, believes that primary legislation via the Finance Bill will “almost certainly” be that action.

In the meantime, the Revenue wants affected parties to consult the legislation’s guidance – which ‘clearly sets out’ the intention of the IR35 reform.

 “This guidance sets out how HMRC will apply the legislation in practice,” adds an official statement of clarification, “and customers should continue to reference it as they prepare for the off-payroll working reform.”