The Treasury’s recent statement concerning personal service companies, published in the Red Book accompanying the Chancellor’s Budget statement, is attracting growing hostility from industry experts.

The statement pledges the government to initiate a consultation on the practicalities of “requiring office holders/controlling persons who are integral to the running of an organisation to have PAYE and NICs deducted at source by the organisation by which they are engaged.” This appears to have been a political reaction to the media furore over the ‘exposé’ of top civil servants working as directors of their own limited companies. It is not going down at all well amongst experts representing the UK’s contractor community and the recruitment industry.

One of the latest to speak out is the REC’s Head of Policy, Gillian Econopouly, who described the unexpected consultation as “extremely disappointing.” She went on:

“The IR35 Forum, which the REC sits on alongside other professional bodies, has worked extremely hard in the past year to improve the administration of IR35, a tax rule whose uncertainty causes many concerns among legitimate contractors. Bringing forward new legislation in this area risks replicating this uncertainty and cuts the heart out of the valued flexibility that highly skilled contractors bring to organisations across all sectors.”

Vowing to challenge the proposals head-on, she added that the best way of ensuring that contractors were deployed properly within organisations, including public sector organisations, was to improve hiring policy and workforce management processes. Imposing new and frankly unnecessary legislation on the whole economy would be likely to damage the productivity of firms that rely on skilled contractors and undermine the competitiveness of the flexible labour market, Ms Econopouly concluded.

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