A straw poll of recruitment agencies has found that a large majority firmly believe that controversial new IR35 tax avoidance rules targeting independent professionals contracting in the public sector will be rolled out to the private sector within two years.
The agencies concerned were attending an IR35 seminar run by recruitment and employment law consultancy Lawspeed. Addressing the assembled recruiters, Lawspeed MD Adrian Marlowe, himself a lawyer specialising in employment and contract law, said that he stood by his earlier assertion that the new IR35 legislation was “badly drafted.”
This view was widely shared by professional bodies representing contracting professionals and the staffing industry during the consultation phase of the reforms. Fierce critics included Umbrella Company trade associations PRISM and the Freelancer and Contractor Services Association (FCSA).
Taking issue with the profound changes inaugurated by the new rules, Mr Marlowe described them as “truly extraordinary,” adding that Revenue officials do not seem to have thought his through.
He continued: “Wherever legislation contains anomalies and ambiguities, HMRC can expect those affected to review their operations, and it is incumbent on us to explain the issues and possibilities that follow. That these rules will cause confusion and disruption in the short term is in no doubt whatsoever, but some clear options do exist.”
The seminar examined how recruiters could protect their margins and maintain their commercial relationship with public sector end clients. Senior legal consultant Ben Grover emphasised that the beginning point for recruiters is to be clear about who they are dealing with. Of pivotal importance is the issue of whether or not the end client is indeed a public sector authority, something that may not always be obvious.
He added: “Once you are sure the rules apply, then make sure they are followed. For example, use of the terms ‘outside or inside IR35’ has no place within the legislation, and therefore no impact.”
The audience consisted predominantly of recruitment companies servicing the public sector. When asked for their views, the overwhelming majority considered the new IR35 regime to be a disaster but also felt certain that it will be extended to the private sector eventually. Most believed that this extension would occur within two years at most.
Earlier this week, a new crowdfunded campaign was launched by IT contractor Mike Gibson and entrepreneur Andrew Merritt-Morling to mount a legal challenge to the ways in which public sector bodies have been implementing the reformed IR35 rules.
Assisted by tax law barrister Michael Paulin, the group is inviting contracting professionals affected by the changes to share their complaints and contribute to the crowd financing of this endeavour via the “Just Giving” website.