In IR35

A letter to MPs penned by the Association of Recruitment Consultancies (ARC) trenchantly criticising new public sector IR35 rules will be published by the Treasury Select Committee as evidence itemising controversial features of the 2017 Finance Bill.

The ARC sent its letter to all MPs last month, drawing attention to the adverse impact that reforms to IR35 regulations contained within the Finance Bill will have on public sector bodies (PSBs) and the thousands of contracting professionals whom they rely upon.

ARC Chair Adrian Marlowe explained that the letter was intended to ensure that MPs are fully aware of the problems areas. These involve not only HMRC’s heavily-criticised new online IR35 assessment tool but also a range of fundamental points of principle.

He went on: “The approach taken by HMRC and the Treasury in taxing self-employed contractors in the way set out, increasing tax levels, imposing administrative and cost burdens on already hard-pressed public authorities, confusing employment income with company invoices and introducing consequent VAT anomalies, is not the correct way to address IR35 tax avoidance perceived by HMRC or public sector off-payroll arrangements. We asked MPs to seek removal of the measures from the Finance Bill and for a wholesale review to be undertaken.”

The Treasury Select Committee originally intended to use the ARC’s letter as evidence in a formal enquiry exploring the more debatable aspects of the Finance Bill. Although the snap election in June has now put paid to that enquiry, the Committee will still proceed with the publication of the letter to furnish MPs with evidence to consider while reviewing the IR35 proposals contained in the Finance Bill.

The reformed IR35 rules are proposed in Chapter 10 ITEPA 2003 of the Finance Bill. The ARC has been advised that the Bill’s final reading in the House of Commons is scheduled for Tuesday 25th April.

The proposals have met with widespread condemnation from industry experts, including Umbrella Company trade associations the Freelancer and Contractor Services Association (FCSA) and PRISM as well as staffing industry representatives such as the Recruitment and Employment Confederation (REC) and the Association of Professional Staffing Companies (APSCo).

Welcoming the Select Committee’s action, Mr Marlowe said that the ARC has done everything within its power to make MPs aware of the issues at stake. It now rests with them to determine whether the measures are excluded or not, he said.

Expressing his sincere hope that a positive outcome is reached, he warned that the IR35 reforms could also set a precedent for the private sector, endangering the UK labour market’s prized flexibility.

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