The Recruitment and Employment Confederation (REC) has published its submission to the consultation on off-payroll taxation in the private sector. It has warned policymakers that an April 2019 rollout of IR35 should be “taken off the table” to allow businesses sufficient time to prepare.
The response was the outcome of months of discussion via webinars and surveys with REC member recruiters, business associations, government representatives and relevant stakeholders.
The core recommendations are:
- Before proceeding with a rollout, a full impact assessment of the reforms in the public sector should be conducted, along with an analysis of the likely effects they will have on the private sector.
The impact assessment must measure the effects over the entire tax compliance cycle, which closes in January next near. Evidence compiled to date of the reforms’ effects remains incomplete and limited in scope. Research conducted by the service agency IFF Research, for example, omitted any consultation with the REC and representatives of the professional contracting community during their HMRC-commissioned investigation into the effects of IR35 last year.
- Continued inaccuracies in the public sector over IR35 determinations must be rectified before extending them to the private sector.
- Any reform should be put on hold until the government has responded fully to Matthew Taylor’s review into modern working practices.
Such a response could include significant reforms to the tax system and to employment status, rendering a pre-emptive IR35 implementation premature as it would be unable to take into account prospective changes to employment status. This would permit time to explore alternatives to IR35 which may in fact be better.
- Businesses must have adequate time to prepare for any planned changes.
An April 2019 deadline for implementing IR35 in the private sector is far too early and “needs to be taken off the table”. Research commissioned by HMRC concedes that public sector bodies would have benefited from a longer lead-in time to the reforms so that they were better prepared.
- The REC believes that liability should rest with the end-client and not the recruitment agency where it is the contractor fee-payer.
It is simply unjust to expect an agency/fee-payer to accept full liability for a decision that an end-client has taken, save for exceptionally limited scenarios in which an end-client can be shown to have failed to have taken reasonable care in reaching a decision or had failed to reply to a request for an explanation.
Commenting, Lewina Farrell, Head of Professional Services at the REC, said: “With Brexit approaching and ongoing uncertainty impacting business confidence, the government cannot afford to introduce reforms which risk damaging the flexibility of the labour market.”