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Call to Government not to 'blunder into' IR35 tax reform
by Susie Hughes at 13:18 02/10/18 (News on IR35)
It was more about what he didn't say, than what he did. Chancellor Philip Hammond failed to mention IR35 or status reform in his speech to Conservative Party Conference, but there remain concerns that that will not be the case in the forth-coming Budget.
The contractor industry is unanimous in its fear that the Government will introduce reforms in the way the private sector can use contractors or freelancers, along similar lines to the public sector.

There has been a consultation process; widespread criticism of the public sector IR35 rules; and countless implementation problems - but it is feared that will not be enough to prevent the Government imposing conditions on clients and contractors operating in the public sector.

These have focussed around the client having to determine the contractors 'status' for tax purposes and the use of a much-criticised online tool, CEST.

Pressure groups are already queuing up to deliver their Budget submission calls and please to the Government not to rush through changes.

Agency representative group, Recruitment and Employment Confederation (REC), has cited evidence from public sector changes, that suggest new measures could be counterproductive for the Treasury and damage the jobs market at a difficult time for business with Brexit on the horizon.

A new survey of REC members, forming part of their Budget submission, indicates:

  • 72 per cent of members that early implementation of IR35 in the private sector would lead to an increase in tax avoidance schemes and non-compliant intermediary models;
  • 42 per cent of members surveyed said that they had observed an increase in the number of non-compliant umbrella/intermediary models since the introduction of the public sector IR35 reform in April 2017
  • 74 per cent of members surveyed said that early implementation of IR35 in the private sector would cause reduced flexibility in the labour market to adapt to changing conditions.

REC chief executive Neil Carberry said: “Everyone should pay the correct amount of tax. But rushing through poorly designed reforms to contractor tax in 2019 could be a gift to the unscrupulous – encouraging those who use tax avoidance schemes not those workers and companies who do the right thing. With many of recruiters seeing a rise in avoidance in the public sector since changes made last year, the vast majority of recruiters are clear that the Government needs to pause for thought on IR35.

“The ongoing employment status review should be completed before any changes are made. And with Brexit causing uncertainty for all UK business, the government can ill afford to introduce reforms which risk damaging the flexibility of the labour market at a time like this.

“The REC wants the Government to conduct a comprehensive impact assessment of the IR35 public sector reforms before progressing to the private sector. Worryingly, previous problems with unregulated intermediary company models have clearly worsened as a direct consequence of the reform in the public sector.”

Non compliant
REC members say that they support government efforts to tackle non-compliance with IR35 and ensure that everyone pays the right amount of tax. Recruiters have repeatedly identified a rise in non-compliant umbrella/intermediary models and tax avoidance caused by the rushed IR35 reform in the public sector.

The agency group says that this non-compliance creates an uneven playing field for compliant recruiters, the private sector, temporary workers and contractors – and the taxpayer loses out.

The REC is also asking that HMRC speed up investigations and implement an appeals process for contractors who disagree with their IR35 determination, while promptly closing down any intermediaries who promote or use non-compliance schemes. Clients should also have liability for the decisions they make on the tax status of contractors.

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Susie Hughes © Shout99 2018

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