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Extending strict IR35 rules to private sector
by Susie Hughes at 13:52 06/03/19 (News on IR35)
The Government has taken a step nearer extending the stricter rules on IR35 into the private sector.
The public sector has been subject to a series of stricter rules relating to the use of contractors for a number of years. These came in for severe criticism from many quarters as they placed an additional burden on the client/agent for determining status of the contractors, and were deemed to be unreliable and unfair for the freelancers.

The Government has always signalled its intention to extend these rules to the private sector, despite widespread opposition.

The Government has now made it clear that they wants businesses in the private sector to become responsible for assessing the employment status of the 'off-payroll' (contractors/freelancers) workers they engage.

They have published a consultation document, Off-payroll working rules from April 2020 outlining their proposals.

Not surprisingly, the freelance sector's reactions ranged from concern to anger.

IPSE - serious harm
Freelancer group, IPSE, thought that the decision to push ahead with the extension of IR35 into the private sector would do serious harm to freelancers, the businesses that use them and the wider economy.

It confirmed that it would be submitting evidence to the consultation warning about the dire risks of the changes to IR35.

IPSE’s Deputy Director of Policy Andy Chamberlain said: “This is an astonishingly myopic move. The UK’s greatest competitive advantage is its flexible labour market. This proposal will dramatically restrict that flexibility and starve UK businesses of the freelance talent they need to get work done.

“Pushing ahead with this during Brexit will hamstring freelancers and their clients when the country needs them most.

“HMRC has claimed pushing these changes into the public sector generated £550 million, but this is at the cost of far-reaching and serious long-term damage.

“In the NHS, TfL and right across the public sector, the changes led to mass contractor walkouts, causing disruption, staff shortages and even the cancellation of major projects.

“Brexit uncertainty has already driven freelancers’ confidence to an all-time low: the last thing they need now is heavy-handed legislation suffocating their sector.

“IPSE, the CBI and numerous other business bodies have already warned about the dire risks of the reforms – and we will do so again in this consultation. The government should finally open its ears to the experts and scrap the dangerous reforms to IR35 once and for all.”

Qdos - Concern
Contractor insurance specialists, Qdos, was concerned that the Government had no sought to rectify a situation which had lead to incorrect assessments in the public sector, before they decided to roll it out further.

Seb Maley, CEO of Qdos, said: “As part of the IR35 consultation, the Government promised to review the true impact of public sector reform. However, it still sees increased tax revenues as a sign of success and increased compliance. The thousands of contractors who have been forced inside IR35 without a fair assessment of their working arrangements and have therefore been overtaxed no doubt beg to differ.

“Aside from making small companies exempt from private sector reform and the promise of making one or two other tweaks, incoming changes do - at this point in time - look very similar to the ones introduced in the public sector in 2017."

Qdos identified specific areas where it had concern.

“It looks like HMRC will expect intermediaries - usually recruitment agencies - to make sure all parties in the contractual chain are operating compliantly. If this is the case, they will carry the liability, meaning it’s vital that they are ready for reform and can contribute to accurate IR35 decisions.

“HMRC has said it has not seen evidence of widespread blanket determinations in the public sector, despite it being common knowledge that a number of organisations practised them.

“While the consultation talks of ways contractors can raise concerns about a status decision, independent workers will still be left wondering why more action isn’t being taken to make sure engagers are administering IR35 accurately in the first place.

“To be able to challenge a status decision, HMRC has said contractors can put forward evidence. This highlights the importance of contractors keeping records and information that together strengthens any case for operating outside the rules.”

Further information
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 2019

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