In IR35

The specialist tax consultancy for contracting professionals, Qdos Contractor, has urged private sector businesses to start preparing now for the introduction of IR35 rules if they want to avoid the chaos and disruption inflicted on the public sector after their implementation in April last year.

Qdos blog contributor Benedict Smith warns that a mountain of evidence suggesting that public sector IR35 not only failed dismally to increase compliance but seriously disrupted temporary hiring, had “predictably fallen on deaf ears”. Many IR35 experts are predicting that, despite promises from the Treasury of a cautious approach, the government will announce a roll-out of the rules to the private sector sooner rather than later.

Smith dissects recently-published research by the online news and support portal, ContractorCalculator, which provides compelling evidence that the reforms had seriously negative unintended consequences in the public sector, even though many experts had warned of them during the original government consultation.

Prominent amongst industry voices vigorously opposing the reforms were Umbrella Company trade associations PRISM and the Freelancer and Contractor Services Association (FCSA), along with the contractor group the Association of Independent Professionals and the Self Employed (IPSE) and recruitment trade bodies the Association of Professional Staffing Companies (APSCo), the Association of Recruitment Consultancies (ARC) and the Recruitment and Employment Confederation (REC). Qdos Contractor, too, opposed the reforms.

Yet, the government ignored their warnings and pressed ahead rapidly with imposing the reforms and, through the auspices of the Treasury and HMRC, appears impervious to subsequent evidence that they have had a most disruptive, and in some instances, devasting, impact on the sector and the contractors it relies on. The same voices are opposing an extension of the rules to the private sector in the current consultation, but many fear their voices will be ignored as previously.

The ContractorCalculator poll of over 2,000 public and private sector contractors contains some disturbing statistics. For example, 94% will avoid inside-IR35 assignments, while 94% will demand employment rights if classified as “employed for tax purposes” and 89% would consider legal action to secure them, while 74% would increase their rates to offset the impact of IR35.

As Smith observes: “Should private sector changes arrive, inaccurate IR35 determinations could rise, as engagers get to grips with the largely unwanted responsibility of setting status. If potential reform mirrors the chaos that ensued following public sector changes, contractors will simply look for projects outside IR35.”

He urges contractors to write to their MPs explaining their objections to IR35 but warns that the reforms appear highly likely and urges private sector firms to consult with independent IR35 experts now to prepare for them.

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