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Widespread condemnation of private sector IR35 plans
by Susie Hughes at 14:03 01/06/18 (News on IR35)
The Government's plans to clamp-down on 'off-payroll' workers in the private sector has been widely condemned by trade bodies and industry experts.
The consultation document is claimed to be skewed in favour of the Government's preferred option - of extending the much-criticised public sector IR35 reforms to the private sector. (See: Consultation starts on new IR35 rules for private sector - May 2018)

IPSE - 'Fatal blow'
Freelancer body, IPSE, didn't pull any punches as it described the Government’s move as 'anti-business', 'shameful' and a 'fatal blow to Britain’s flexible economy'.

IPSE's CEO, Chris Bryce, said: “For the Government to even consider introducing the ill-judged changes to IR35 in the public sector to the private sector before their full impact can be truly analysed is outrageous.

“It would be a fatal blow to the UK’s flexible economy.

“IPSE’s research – which suggests large numbers of contractors are walking away from the public sector, with a particularly bad effect on the NHS – paints a very different picture from the Government’s report.

“It is shameful that the Government did not publish the external research into the impacts of the public sector changes prior to announcing this consultation.

“Undermining confidence in our flexible, self-employed workforce is the last thing the Government should be doing at this time of great uncertainty over Brexit.

“How can the Government hold this anti-business consultation when it won’t even know the full tax implications of the changes made last year until people file their tax returns in January 2019?

“Furthermore, the consultation itself is based on flawed assumptions.

“The Government is kidding itself if it thinks HMRC’s online tool – which it encourages people to use to determine their IR35 status – can be relied upon.

“Recently, an IT contractor successfully argued in court that HMRC had incorrectly determined that he was caught by IR35.

“If HMRC, with all its resources and expertise, cannot make an accurate IR35 determination, how can it expect anyone else to get it right?

“IR35 is so complex, not even HMRC can accurately determine who it applies to.

“Now they want to shove that impossible task on to UK businesses. For the sake of our economy, IPSE will fight this proposal all the way.”

Qdos - 'Unnecessary'
Industry tax specialists, Qdos Contractor, thought that the Government should concentrate on making the public sector reforms workable before considering any extension to the private sector.

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Seb Maley, Qdos Contractor CEO, said: "Chaos and confusion continues to define public sector reform, so the Government would be taking a huge risk to press on and extend changes to the private sector. Until public sector bodies prove they can make accurate IR35 decisions on a large scale, plans for the private sector must be shelved.

"This consultation is an opportunity for the Government to thoroughly and honestly review the impact private sector reform could have on contractors, engagers and the many other parties in the supply chain.

"HMRC has been adamant last year's changes in the public sector have been a success, despite many indicators suggesting otherwise. We urge the Government to take this consultation seriously and leave no stone unturned. If they do this, they will soon realise that private sector reform is unnecessary."

FCSA - 'Dismal'
Trade association, the Freelancer and Contractor Services Association (FCSA) wondered how the Government could consider extending measures to the private sector when they had such a 'dismal' record with this measure in the public sector.

Julia Kermode, chief executive of FCSA said: “HMRC’s track record on IR35 is dismal and it is unthinkable that it can expect end-hirers to take responsibility for IR35 when it is proven that they cannot implement it properly themselves. The reforms in the public sector have had a devastating impact as has been widely reported. HMRC has failed to communicate effectively with 50,000 public sector bodies so to roll the reforms out to 5.5m private businesses in the UK will require a massive upscaling of current policy implementation which HMRC is simply not equipped to do. HMRC is already over-stretched and the public sector changes were not implemented properly. In recent times, we have seen a number of tax policy changes introduced which have simply served to penalise the contingent workforce and the businesses that support them, leaving them financially worse off and under-valued by a Government that claims to recognise the economic importance of the flexible workforce. It would be simply malicious and wrong to punish these workers and the businesses that have been the financial backbone of the UK economy in recent years by imposing these reforms on them.

“It is interesting to read that HMRC is not simply planning to replicate a roll out of the public sector reforms into the private sector and is considering other options such as supply chain assurance and additional record-keeping processes, which aligns with the Government's Labour Market Strategy.

"I am also pleased to see that other options have been rejected such as withholding tax which was an option on the table. However, we disagree that public sector compliance has improved since the reforms were implemented; all that we have seen is an increase in numbers on payroll, which is not substantive proof that they should be there at all and simply put there under inaccurate blanket or role-based decisions made by their engagers.

“Worryingly, the timescale of this consultation means that changes could still introduced for April 2019, although I hope that common sense prevails and that any changes are properly planned so that we do not disrupt the economy at a critical time when we leave the EU.”

APSCo - 'Adverse impact'
Agency body, APSCo reaffirmed its concerns around extending the public sector off-payroll rules.

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The trade body has also raised questions around how the Government’s independent research on the impact of off-payroll reform in the public sector - which was undertaken by IFF research and Frontier Economics - is presented alongside the consultation.

Previous research by APSCo found that 45 per cent of professional recruitment consultancies have witnessed the costs of resourcing contractors within the public sector increasing since the new rules were introduced.

Of these, 46 per cent reported that rate rises were in excess of 15 per cent. Furthermore, more than three quarters of respondents agreed that the extension of the IR35 off-payroll rules to the private sector will impact the ability of the UK economy to source flexible labour.

Samantha Hurley from APSCo said: “We have now fully briefed our members on the consultation. Although we welcome the opportunity for all stakeholders to consult, we at APSCo feel that the consultation has been written in a fairly leading way and, in our opinion, the manner in which this has been presented gives little alternative to the Government’s preferred option to extend the off-payroll rules to the private sector.

“Our own research undertaken with our members - which HMRC has largely labelled as anecdotal - does not reflect the findings of the research undertaken with public bodies.

“The consultation document and accompanying collateral also gloss over any negative feedback by burying it below the headline findings. For example, almost a third of central bodies surveyed for HMRC’s research reported that the reforms had led to them increasing the gross hourly rates paid to off-payroll contractors. However, it was not recorded how significant these rises were, and this was not highlighted in HMRC’s easily digestible factsheet.

“Like our members, we believe that extending these rules to the private sector will have an adverse impact on the strength of the UK’s labour market and wider economy and we will be working closely with our members and liaising with HMRC and other IR35 Forum members on our response to this consultation.”

The Government has asked for responses to the consultation, which can be found on its website: Off payroll working in the private sector - May 2018. Closing date for comment is August 10, 2018.

For more information about the controversial IR35 tests and rules; and other aspects of IR35, see Shout99's News on IR35 section.


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Susie Hughes © Shout99 2018

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