The Recruitment and Employment Confederation (REC) has released details of its recent discussions with HMRC concerning the prospect of IR35 reforms being extended to the private sector.

Since the autumn Budget four weeks ago, HMRC officials have attended an REC Engineering & Technology Sector meeting, while the REC participated in HMRC’s IR35 stakeholder forum last week.

Expressing disappointment in the government’s continuing emphasis on the controversial reforms, the REC nonetheless welcomed the decision to consult widely and to avoid rushing changes through. In the public sector, ill-advised haste resulted in the mass exodus of contracting professionals from a number of crucial projects and serious delays in others.

The key points emerging from the two meetings were:

The breadth of the consultation

HMRC officials emphasised that the consultation will address compliance with IR35 in the private sector “in the broadest sense.” The consultation will be wide-ranging but propelled by reports that non-compliance with the reformed rules in the private sector will result in a shortfall of tax revenues to the exchequer of £1.2bn by 2021/22. This was a significant increase compared with earlier estimates and REC has pressed both the Treasury and the HMRC to reveal the model they have used for the latest projection.

Timing

While the HMRC were not yet in a position to specify when the consultation would be published, they were able to confirm that it would be in the New Year at the earliest. The REC will stress the necessity for contracting professionals, businesses and recruiters to be properly consulted and allowed sufficient time to prepare for any changes. It will also be necessary for government to appreciate that other issues will be exercising all parties, including the consultation on employment status in the aftermath of the Taylor Review, the Making Tax Digital reforms and the emerging Brexit timetable.

Questionable research

HMRC announced that it has commissioned independent research into the effect of IR35 on the public sector, but when pressed conceded that contracting professionals and representative bodies have not been consulted. The REC fears that this will fail to yield an accurate picture of the true impact of the legislation. In the light of this announcement, the REC believes that it is all the more important for it to collect evidence from the staffing industry on the effects of the rebooted rules, which it has begun doing with a survey. It will also collect detailed case studies.

Prior to the publication of the IR35 consultation, the REC will proceed with making representations to the HMRC and the Treasury while also liaising with other affected organisations and collecting its own evidential material.

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