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Autumn Budget 2017 (3): Mixed reaction to IR35 consultation
by Susie Hughes at 16:16 22/11/17 (Political News)
The freelancing world had a mixed reaction to the Budget announcement of a consultation into extending the public sector IR35 measures to the private sector.
In general there was relief that it wasn't as bad as had been expected in so much as it was a consultation exercise rather than a firm announcement of action.

The 'Red Book' of Budget documentation gave details of a consultation into private sector IR35: “A possible next step would be to extend the reforms to the private sector, to ensure individuals who effectively work as employees are taxed as employees even if they choose to structure their work through a company. It is right that the government take account of the needs of businesses and individuals who would implement any change.

“Therefore the government will carefully consult on how to tackle non-compliance in the private sector, drawing on the experience of the public sector reforms, including through external research already commissioned by the government and due to be published in 2018.”

Qdos- 'Relief'
Tax specialists, Qdos Contractor, warned that this does not gloss over what is a continued attack on the UK’s independent workforce with regards to the off-payroll working rules.

They also took comfort that the Budget revealed a consultation rather than an announcement that reform was inevitable.

Seb Maley, CEO of Qdos Contractor, said: “That the Government plans to explore private sector IR35 is a relief in the sense that reform was not announced. This consultation must be taken seriously though, and not simply be used as a tool to delay any announcements on private sector reform. Everything still points towards these changes being enforced at some point. So we must be realistic.

“A consultation doesn’t detract from the bigger issue either, and that is this Government is failing to take care of the independent workforce with regards to IR35. We do not believe reform is a fair, nor necessary way to stamp out what the Government claims to be widespread tax avoidance from contractors.

“Regardless of widely predicted future changes, contractors, private sector companies and agencies must not panic. But mistakes made in the public sector cannot be made again. Companies and agencies need adequate time to prepare, and the Government must work with industry leaders and put together a detailed roadmap. It is imperative that the research the Government has commissioned in respect of the public sector reform takes into account the issues faced not only by engagers, but by contractors too.”

FCSA - 'Fantastic'
The Freelancer and Contractor Services Association also breathed a sigh of relief that it was consultation rather than implementation.

Julia Kermode, chief executive of (FCSA), said: “Surprisingly the Chancellor’s speech made no mention of IR35 or off-payroll reforms being extended to the private sector, however it was included in the 'Red Book' where he commits to a 'careful consultation' on how to tackle non-compliance in the private sector.

"This is fantastic news and shows that the Government has finally listened to FCSA's many concerns regarding the public sector changes already in place, their devastating impact on the public sector and increase in non-compliant schemes that have resulted. It is very positive that the Government has not simply bulldozed ahead with legislation that would have a negative impact on the flexible workforce and the UK economy as a whole."

ContractorCalculator - 'Mess'
Dave Chaplin, CEO of ContractorCalculator website saw a down side that the mistakes of the public sector could be reenacted in the private sector. He said:“The Government may have announced a consultation into the proposed IR35 changes, but if the public sector changes are anything to go by, the recommendations already look predetermined.

“The Public Sector IR35 Reforms were a mess, are still a mess, and there are lawyers lining up to potentially launch a judicial review.

“Rolling out the reforms to the private sector will be like pouring glue on the flexible economy. Taxes will decrease as people move from lucrative freelancing to lower paid permanent work, and the cost of hiring the remaining contractors will rise as rates go up due to changes in supply and demand. Business will have less agility by not being able to access UK freelancers in any easy way, and many will turn to online freelance portals to hire freelancers overseas, without the red tape burden associated with IR35. Complete and utter disaster for UK Plc.

“The compliance burden will be huge as every B2B transaction involving the supply of labour will need to be considered. Costs will also increase for all small businesses found to be effectively hiring workers who are in ‘deemed employment’. This is because they will be asked to meet their tax obligations and pay the 13.8 per cent employers NI they have previously avoided and which will now be payable under the new rules. That’s a huge additional cost of doing business and the business community will want time to prepare for that kind of sea change.”

Brookson - Uncertainty
Brookson, which specialises in professional services for self-employed contractors, also welcomed the period of consultation rather than a rushed decision.

Martin Hesketh, Brookson CEO, said: “We are pleased that the government don’t appear to be planning on proceeding with any changes in the short term and seem to have listened to stakeholders’ concerns that a similar change to that seen in the Public Sector could result in significant damage to the flexible labour market, and ultimately the goal to achieve a dynamic and innovative UK economy”.

“This announcement will result in a period of uncertainty and we urge the Government to provide further clarity on timescales and the consultation process; that said, genuinely self-employed contractors should not panic and end hirers and agencies should not make knee jerk reactions.

“We would expect the government to undertake a public consultation which we will be involved in and will continue to lobby to ensure that the outcome remains supportive of genuinely self-employed, highly productive contractors."

Further information
Shout99 will continue coverage of the stories emerging from the Budget; in the announcements after the Budget; and expert comment and analysis in the Political News section of Shout99.

Further information about IR35, can be found in News on IR35

Alerts also available through our Twitter feed.

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Susie Hughes © Shout99 2017

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