An expert on the UK’s professional contracting and freelancing workforce has warned that the government intends to extend controversial public sector IR35 reforms to the private sector as early as April next year.
Dave Chaplin, founder and CEO of ContractorCalculator, made his assertion after carefully reading the minutes of the last meeting of the IR35 Forum, which took place on 11 December last year.
Many in the UK’s contracting community had feared that Chancellor Phillip Hammond would announce an extension of the new rules to the private sector in his November budget. However, he chose instead to begin a consultation on how to deal with private sector tax non-compliance.
But according to Mr Chaplin, this is beginning to look like a cynical gesture, as the decision to extend the rules appears already to have been taken before the consultation has even begun.
When he analysed the latest IR35 Forum minutes, he noted a reference in the document to the government’s own estimate that the exchequer will miss out on £1.2bn by 2023 unless tax non-compliance in the private sector is tackled. The document also makes reference to an “immediate need to consider how best to tackle private sector non-compliance with the off-payroll working rules”.
Chaplin further explains that an April 2019 rollout in the private sector would be in accord with the government’s new budget timetable. He believes the consultation will be launched very shortly but is clearly sceptical about its true purpose, as it appears to be “nothing more than a formality”.
Even though HMRC concedes in the document that IR35 reforms had in fact fuelled non-compliance within the public sector in some instances, it still maintains that tackling what it calls “an immediate exchequer risk” is its top priority.
He went on: “I would argue that HMRC simply cannot be trusted, claiming to listen while pressing ahead with its plans come what may. HMRC depends on trust. It is central to the ethos of tax collection, which relies on voluntary compliance with the tax code.
“Yet, for an increasing number of freelancers, the integrity of HMRC is in doubt and, with its reputation being damaged, its ability to raise tax becomes threatened and the country subsequently suffers. It’s all about the money with no concern about people’s livelihoods, public services or the future impact on the UK economy.”
Chaplain argues that any attempt to truly evaluate the impact of the public sector reforms when they are less than a year old is premature, while all stakeholders are agreed that the Taylor Review and IR35 should be considered holistically.
HMRC’s failure to acknowledge the correlation he said, was “farcical”.