The professional contracting sector and its representative groups have responded to the Government’s now-concluded consultation on private sector off-payroll taxation by opposing the officially preferred option of imposing reformed IR35 there unamended.
Qdos Contractor, the specialist tax consultancy for contracting professionals, has warned of the destructive effects the reforms will wreak on the huge private sector if they are replicated there without first ironing out serious flaws in HMRC’s methods of assessing a contractor’s tax status. Such corrections would make early implementation of the reforms deeply inadvisable, the tax consultancy warns.
While the reforms in the public sector may have correctly increased compliance in some cases, Qdos concedes, in thousands of others, contractors were wrongly classified as inside IR35.
In its consultation response, Qdos urges a complete cessation of HMRC’s advocacy for role-based assessments, as these have no basis in the application of IR35 determinations, which must instead be conducted on a strictly case by case basis informed by complex case law.
Highlighting the unfairness of taxing contracting professionals as employees yet providing them with none of the statuary employment benefits the tax is supposed to fund, Qdos also notes the rise in the forced use of umbrella companies in the public sector and the endless failing of HMRC’s Check Employment Status for Tax (CEST) tool.
Qdos also insists that any increase in compliance activity in either private or public sectors should be accompanied by better education and additional resources, both for the contractors themselves and others involved in the supply chain. Neither the task of improving HMRC inefficiencies or providing additional education and resources can be accomplished immediately. To prevent damage to the private sector, these flaws should be rectified before new compliance regulations come into effect.
Commenting on the response document, Qdos Contractor’s CEO Seb Maley noted that many contractors are still continuing to be incorrectly designated as inside IR35 in the public sector. Should, as seems probable, this occurs in the private sector, businesses would thereby be exposed to substantial liability risks.
He added: “To extend reform when the dust clearly hasn’t settled on public sector changes would be short-sighted. The Government must prioritise sorting the chaos caused by public sector reform before announcing private sector changes. And in any case, further reform would break the Government’s promise to support small businesses.”
A Government decision to forge ahead with the changes, he said, would risk wholly losing the support of contracting workers. A 2019 rollout would be “premature”, as engagers must have sufficient time to equip themselves with the knowledge and skills needed to make correct IR35 determinations on such a vast scale.