Question to the HM Treasury:

To ask Mr Chancellor of the Exchequer, what assessment he has made of the effect on compliance of the recent reforms to off-payroll working in the public sector; and what recent assessment he has made of the level and effects of non-compliance relating to the recent reforms to off-payroll working in the private sector.

The off-payroll rules (commonly known as IR35) ensure that where an individual would be an employee if they were engaged directly rather than through their own company, they pay broadly the same taxes as employees. Since April 2017, public sector bodies have been responsible for deciding if these rules apply. Early analysis of tax receipts between April and June shows that around 90,000 additional new engagements occurred in the public sector above the level that would normally be expected. This indicates more individuals are being taxed as employees since the reforms, and is consistent with the government’s expectations that the reforms would increase tax compliance in the public sector.

The cost of non-compliance in the private sector is continuing to increase: the latest estimate is that tax losses to the Exchequer will grow to £1.2 billion a year by 2022/23. This is part of the wider increasing cost of incorporation highlighted by the OBR in their 2017 Fiscal Risks Report.