HMRC’s consultation proposes offsetting taxes overpaid by different parties in the labour chain when an off-payroll working employment status determination has been corrected.

ICAEW’s Tax Faculty welcomes the proposals in HMRC’s consultation to allow HMRC to account for taxes already paid by an individual and/or their intermediary (eg, personal service company) when calculating a deemed employer’s tax and national insurance contributions (NIC) liability where an error in applying the off-payroll working rules has been corrected. The aim of this change is to make the system more workable and equitable.

The faculty hopes that the government will move swiftly to consulting on draft legislation, so that there is time for a thorough review before it is enacted with effect from 6 April 2024.

The faculty responded in ICAEW REP 56/23 to HMRC’s consultation, which was published on 27 April 2023.

The faculty recommends that the following rights of appeal should be extended and legislated for at the same time. 

  • The deadline by which the worker can appeal against the direction notice should be 60 rather than 30 days, because 30 days is too short a time in which to check intricate calculations given that the direction will likely come out of the blue and an adviser will probably need to be instructed to help check the figures. 
  • The tribunals and courts need to be able to adjudicate on PAYE tax credits, (ie, how much tax someone should pay), rather than this having to be considered by the county court.
  • There should be a right of appeal once the off-payroll working employment status determination disagreements process between client and worker has been exhausted, rather than the worker having to wait until HMRC reviews their self assessment return.

In addition, the Tax Faculty suggests that if this rather complicated direction can be given in respect of set offs under Ch 10, Pt 2, Income Tax (Earnings and Pensions) Act 2003, HMRC should also consider providing something similar in cases that fall under Ch 8 (the old IR35 rules still applicable where there are small or foreign clients) and Ch 9 (managed service companies).

Finally, the faculty believes that a review of employment status and the difference between tax and social security contributions paid by the employed and self-employed is needed to resolve the issues of off-payroll working. The number of tax employment status cases and the different decisions reached as the cases pass through the judicial system highlight that the current system is too complicated and difficult to understand, administer and police.


ICAEW’s Tax Faculty is recognised internationally as a leading authority and source of expertise on taxation. The faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.

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