In IR35

Further responses have emerged to media reports that the Chancellor is planning to announce in his forthcoming budget an extension of controversial public sector IR35 rules to the private sector.

The public sector reforms met with enormous criticism from the professional contracting and recruitment sectors for the rushed manner in which they were imposed in April last year. The rule changes have driven widespread confusion, with a number of prominent public sector organisations imposing blanket inside-IR35 determinations on all contractors driving a sizeable exodus of professional contractors away from the public sector altogether. In other instances, important projects have been seriously delayed.

The recent Government consultation implementing the rule changes in the private sector met with vigorous opposition from multiple organisations representing contracting professionals and recruiters, all of which urged much greater caution before rushing ahead with reforms as happened in the public sector

A BBC report last week quoted HMRC estimates that failing to tackle “false self-employment” in the private sector would cost HMRC £1.2 billion in unpaid taxes by 2023. The Treasury believes that one-third of contractors working through their own personal service companies in the private sector are actually de facto employees and should pay more tax.

Should the BBC report prove accurate, Julia Kermode, CEO of umbrella company trade association the Freelancer and Contractor Services Association (FCSA), charges HMRC with failing to properly consider the large number of consultation responses it received on the planned private sector IR35 extension.

Taking issue with the much-quoted £1.2 billion figure as based on glaringly inaccurate assumptions contained within the Office for Budget Responsibility’s Fiscal Report from July 2017, Ms Kermode added: “It is incredibly frustrating that policymakers justify their decisions on figures that are shaky at best, without properly considering the detail behind those figures, let alone the devastating impact on the UK economy.”

Meanwhile, Andy Chamberlain, Deputy Director of Policy at the Association of Independent Professionals and the Self Employed (IPSE), accused the Government of “loading the gun against the self-employed” with a “myopic” policy that amounted to nothing more than “a short-sighted tax grab that will cause untold economic damage in the long term”.

Tanya Bowers, general counsel at the Association of Professional Staffing Companies (APSCo), urged the Government to delay any implementation of the reforms for at least twelve months to allow businesses sufficient time to prepare and to address serious problems with the “inaccurate and not fit for purpose” Check Employment Status for Tax (CEST) tool.

A recent poll of 2,000 contractors by ContractorCalculator found that 98% would actively turn down any work that could lead to them being paid through PAYE.

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