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The controversial changes will go ahead as planned in the private sector from April 6, 2021 - after a year's delay due to the Covid-19 pandemic.
Qdos - inadequate
Tax investigation experts, Qdos, thought the reaction was 'incredible', 'inadequate' and 'frustrating' but not surprising given the Government's continued reluctance to acet failings in its online status assessment tool (CEST).
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“I find it incredible, but unsurprising, that the Government refuses to acknowledge CEST’s failings. Time after time HMRC’s IR35 tool has been exposed as unreliable and incapable of assessing tax status accurately, but still, the Government claims that it’s fit-for-purpose and up to the job. In reality, it isn’t.
“The Government hasn’t directly addressed the issue of zero-rights employment either - an unfairness highlighted in the Lords report. Zero-rights employment occurs when a contractor is deemed inside IR35 and is therefore taxed at a similar rate to an employee but receives no employment rights in return. This is an injustice that needs resolving immediately.
“While this response is inadequate and frustrating, it doesn’t change the overall picture. IR35 reform is arriving in the private sector next April, which means businesses must prepare for the changes immediately. Despite being narrow-minded and short-sighted, the reform can in fact be managed with the right approach.”
Lip service
Dave Chaplin, CEO of contracting authority ContractorCalculator said: “The Government has simply paid lip-service to the fundamental flaws of the reforms pointed out to them by the Lords. Their report lacks any substance and gives light promises that HMRC will work to help businesses to prepare. Don’t hold your breath.
“As for its comments on CEST, it is staggering that the Government continues to spout out the same debunked messages that the tool has been robustly and rigorously tested. Everyone knows, from FOI requests, that they do not hold any detailed evidence to prove their claims. It’s interesting to note that mutuality of obligation was not even addressed – it’s a key element of case law and it was omitted from CEST.
“The claim that firms have not decided to ban the use of limited company contractors because of these tax reforms is derisory. It’s well known that it is the primary reason for a number of firms, including all in the financial sector, with many now moving lots of their project work abroad.
“The concerns raised about non-compliant umbrella companies are valid ones. If firms are not engaging with contractors, and instead want to hire temporary workers, then the safest form of hire is to simply use fixed term employment contracts and put them on their own payroll. If firms want an employee, and give them all the rights that come with employment, then hire one.
“It would appear that the threat of losing the vote on the tabled amendment resulted in the Treasury and HMRC having to make considerable assurances that the implementation would not have an adverse effect on the UK’s valuable sector workforce. They can make as many assurances as they want – the legislation is set to have a hugely damaging effect on contractors, the firms that hire them and the economy as a whole.”
The Government's response to the House of Lords report is available here: here
Further IR35 information
For more information about all aspects of IR35, including the controversial IR35 reforms see Shout99's News on IR35 section.
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Susie Hughes © Shout99 2020
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