A government review has been launched into new tax rules expected to hit thousands of contractors across the oil and gas industry.
The Treasury said it recognised the concerns raised by the measures – known as IR35 – and the review would aim to address these ahead of their introduction for the private sector in April.
IR35 is a measure to prevent an individual who is working as an employee of a company from registering themselves as a freelance contractor in order to pay less tax.
From April 6, every medium and large private sector business in the UK will become responsible for setting the tax status of any contract worker they use, forcing thousands to pay income tax, as well as a higher rate of National Insurance.
West Aberdeenshire and Kincardine MP Andrew Bowie has warned the Treasury that it could see some north-east workers’ income reduce by as much as 25%.
The government said the review would conclude by mid-February, engaging with affected businesses to make the reforms as “smooth as possible”.
It will include a series of roundtables with medium and large-sized firms, further analysis on the impact, and whether any further steps could be taken to support businesses.
In parallel, HMRC will continue its own programme of “education and support activities” to help prepare for the reforms.
Financial secretary to the Treasury, Jesse Norman, said: “We recognise that concerns have been raised about the forthcoming reforms to the off-payroll working rules.
“The purpose of this consultation is to make sure that the implementation of these changes in April is as smooth as possible.”
The Treasury said IR35 remains on course for its April 6 introduction, despite the review.
Commentators said the timing indicates the government will only take a “light touch”, with the mid-February end date being close to the March 11 Budget which will confirm the legislation.
Brian Rudkin, head of employer services at accountancy firm Johnston Carmichael, said: “That is not enough time to do anything significant.
“The emphasis is very much on support, both in relation to implementation of the new regime, and also for the genuinely self-employed who will remain outside the scope of IR35.
“There is no mention of the legislation being delayed or withdrawn and so this is as strong an indication as we are going to get that the legislation is here to stay.”
Mr Rudkin said it is hoped that improved legislation and guidance will be published shortly after the Budget, but “even if this does happen, it is leaving things tight for organisations to be ready for April 6”.
Elsewhere Matt Fryer, group compliance director, at Brookson Legal said the move confirmed there will be “no last-minute policy U-turn” and firms should get ready now.
He added: “It would also be helpful to have further clarity on responsibility for IR35 compliance within the supply chain as this will be a key issue for businesses working with recruitment agencies moving forwards.
“Finally, we would expect a “soft landing” post-April, with HMRC using the first 12 months to continue to educate, rather than seek to punish businesses who have not been able to get their house in order.”
The Treasury has estimated the measure will bring in an additional £2.9billion in taxes by 2024, following similar rules being brought in for the public sector.
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