Off-payroll working reforms – effects, impacts and the future

16 December 2022

HM Revenue and Customs (HMRC) has released a research report and a corporate report regarding the off-payroll working reforms for the private and voluntary sector.

Short-term effects of the 2021 off-payroll working rules reform for private and voluntary sector organisations

Impacts of the 2021 off-payroll working rules reform in the private and voluntary sectors

The short-term effects report, conducted by IFF Research, explores:

  • changes to workforce structures
  • personal service company (PSC) engagements
  • costs to businesses
  • administration of the reforms
  • overseas workers.

This data driven piece has some in depth analysis and some interesting results. There is less change in some areas, such as how workers are engaged, that may have been anticipated.

The impacts report, produced by HMRC, dives into:

  • changes to the way workers provided their services
  • additional tax revenue generated
  • costs incurred in relation to the reform
  • education and support provided by HMRC.

 Of note are estimates that businesses across the UK have incurred a on-off cost of between £90 million and £230 million to prepare and implement the reforms. In the first year a further £150 million to £370 million was spent operating the reforms, but this is likely to reduce over time as businesses adapt and improve processes.  

An estimated £1.8 billion has been raised in tax revenue for the Exchequer. This makes the proposed abolishment of the reforms from the growth plan, now U-turned, confusing from a Treasury perspective.

Not mentioned within the report are planned updates to the Check Employment Status for Tax (CEST) tool, however, the treasury minutes report has highlighted this previously. The tools will be migrated to a new system to give HMRC “faster and more comprehensive control of its content”.

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