Qdos Contractor, the specialist tax advisory consultancy for contracting professionals, has compiled a series of measures devised by IR35 experts that government should consider before implementing off-payroll tax reforms in the private sector.
The IR35 specialists, drawn from the contracting, recruitment and private business sectors, suggested the measures in their submissions to the recently closed consultation on extending public sector IR35 reforms to the private sector.
HMRC remains insistent that the public sector reforms have been a success. In their consultation responses, the IR35 experts dispute this and propose corrective measures:
Link employment rights to tax status
In a recent poll by Qdos Contractor, 89% of contracting professionals said they would demand employment rights if forced to work within IR35. Qdos supports this and cautions the government not to proceed with the reforms until affected contractors are permitted full employment rights commensurate with any inside-IR35 taxation.
Grant ‘IR35 Passports’
Ernst & Young recommended in their consultation response that ‘IR35 passports’ be created which would allow contractors to have their tax status verified by expert accredited providers, an innovation that would lift the administrative burden of IR35 determinations from engagers.
Take a more nuanced approach to sectoral impact
In its submission, the REC emphasised the inability of HMRC’s CEST tool to distinguish properly between specific roles and industries. It urged the government to exercise due diligence in recognising the multiple different business models within the private sector and grant businesses adequate time and resources to prepare.
Give contracting professionals control
In its submission to the consultation, umbrella company trade association the FCSA recommended returning responsibility for determining IR35 status back to individual contracting professionals if the reforms come to the private sector under a new “Enhanced Reporting and Enforcement Solution”. This would oblige them to demonstrate reasonable care by sharing information up the supply chain and submit quarterly reports to HMRC.
Exempt the smallest businesses
As gigantic engagers like the NHS have struggled to make accurate IR35 determinations, SMEs and microbusinesses will face a near-impossible administrative task. IPSE, in its submission, recommends exempting the smallest businesses in the economy from any IR35 rollout.
Properly measure impact in the public sector
This recommendation came from the Chartered Institute of Taxation (CIOT), which recommends careful research into the true impact of the public sector reforms based on the full self-assessment cycle which will not conclude until January 2019 before any extension to the private sector.
Other recommendations include improving IR35 infrastructure through HMRC investment to guide engagers on how to manage any reform and overhauling the CEST tool to take full account of Mutuality of Obligation, which it currently omits.