As this news article goes to press ahead of the Chancellor’s Autumn Budget Statement today, it seems likely that the government will proceed with plans to extend controversial new public sector IR35 rules to the private sector, despite strong warnings from a range of contracting stakeholders that the move could cause considerable harm to the UK economy.
Private sector businesses would join public sector establishments in becoming responsible for determining if limited company contracting professionals should be taxed in the same way was conventional employees
The reforms have caused significant upheaval in the public sector since their introduction in April, prompting mass walkouts of IT contractors from HMRC, the Home Office and other government departments.
Speaking to Computer Weekly, Andy Chamberlain, Deputy Director of Policy at IPSE said, “There has not been a proper impact assessment of how the rules have worked in the public sector, so it seems reckless for the government to be thinking about pushing the same set of rules into the private sector when we know it has been so controversial.”
In the context of rising economic instability ahead of Brexit, many fear that the extension will cause huge damage to “UK PLC.” Chamberlain explained that large companies already feel unsure about investing in Britain due to Brexit uncertainties. But with the government imposing burdensome new administrative obligations on any company that wants to access Britain’s prized flexible labour market, that uncertainty is likely to deter potential investors.
The government, Chamberlain added, does not appear to have understood just how complex these rules really are to deal with.
Meanwhile, Dave Chaplin, CEO and founder of the online tax advisory service for contracting professionals, ContractorCalculator, warned that extending the rules without allowing sufficient time for private firms to prepare could result in a repeat of the serious problems IR35 caused in the public sector.
Seb Maley, CEO of contractor tax advisers Qdos Contractor, endorsed calls from Mr Chamberlain to conduct a proper consultation on a proposed role out, because the government is highly likely to face much fiercer opposition to the changes from the private sector than it did from the public sector.
Trying to ram the rules through by April 2018, he warned, would result in a “car crash.” Businesses will need time to adapt their working practices to ensure much-valued contracting professionals can continue to work outside IR35, a process that requires a contract-by-contract analysis based upon deep knowledge of the nuances of case law, not reliance on an ineffective and inaccurate online tool such as HMRC proposed in the public sector.