Lawyers acting for the Association of Recruitment Consultancies (ARC) have written formally to Her Majesty’s Revenue & Customs (HMRC) saying that the proposed changes to IR35 rules are illegitimate.
The legal and recruitment professionals’ trade body has warned that, in the context of HRMC’s flawed online tool, the proposed changes to rules affecting contracting professionals in the public sector would be either unlawful or lead to unlawfulness.
The changes are due to come into effect on 6th April 2017, but ARC Chair Adrian Marlowe has pointed out that HRMC’s online IR35 status tool has, from the outset, been described by officials as being fundamental to the success of the new policy.
ARC’s public law specialists, Bindmans, has now sent a carefully-worded letter warning of prospective illegalities.
A broad swathe of experts representing public sector end clients, the staffing industry and contracting professionals has voiced trenchant criticism of the new rules.
Prominent critics include Umbrella Company associations PRISM and the Freelancer and Contractor Services Association (FCSA), Umbrella Company group Unitum, the Association of Independent Professionals and the Self-Employed (IPSE) and recruitment bodies the Association of Professional Staffing Companies (APSCo), the Recruitment and Employment Confederation (REC) and ARC.
ARC is now echoing recent calls from the FCSA, the Chartered Institute of Public Finance and Accountancy (CIPFA), the Local Government Association (LGA) and the Society of Local Authority Chief Executives (SOLACE) to defer the implementation of the draft legislation until a thorough, meaningful review has been undertaken to address widespread concerns seriously and carefully consider the legality of the reforms.
Describing the consultation process over the online tool as being very worrying, Marlowe said: “From the outset, we have expressed concerns, as have many others, as to how the tool could work legally in practice given that HMRC says that it will stand by the result.
“The tool was always likely to be set up on a checklist basis, a methodology repeatedly ruled by the courts as the wrong approach. With few checks and balances in place over the programming of the tool, among other things, there is a real risk of unfair prejudice.”
He criticised the inch-by-inch way the government has progressed the programme over an extended period, and emphasised that, with less than a week to go before the budget, HMRC has still not finalised the development of the tool and may even change the draft legislation.
Even though no clear and final position is yet available, the government appears intent on rendering hirers and agencies liable, and on making them use the tool irrespective of the concerns raised, Marlowe added.
He concluded by acknowledging that, while IR35 reform is needed, it should not result in the unlawfulness or the clearly-foreseeable problems outlined by Bindmans.