Private Sector IR35 Consultation Responses Criticise Proposals

Private Sector IR35 Consultation Responses Criticise Proposals

19 June 2019

Respondents to HMRC’s consultation on proposed changes to IR35 rules in the private sector have highlighted a number of concerns about the plans.

Analysing consultation responses from a broad range of interest groups, ContractorCalculator found a number of recurring themes in the criticism. See article: https://www.contractorcalculator.co.uk/ir35_summary_responses_off_payroll_private_sector_551010_news.aspx

HMRC launched a consultation into off-payroll working rules in the private sector earlier this year. The planned reforms would affect limited company contractors working in the private sector from April 2020.

Contractors working for companies with fewer than 50 employees would be exempt, but larger organisations will be responsible for judging the IR35 status of contractors that they engage.

ContractorCalculator analysed 29 consultation responses from experts in a number of sectors including the Chartered Accountants in England and Wales (ICAEW), the Confederation of British Industry (CBI) and the Association of Independent Professionals and the Self Employed (IPSE).

In the responses, recurring issues and recommendations included:

•    Pause reforms until April 2021

•    Opposition to client-led disagreement process

•    Liability model grossly unfair on compliant parties

•    Calls for deemed employees to receive employment rights

•    Small company exemption deemed unsuitable

•    HMRC’s Check Employment Status for Tax (CEST) tool deemed not fit for purpose

•    Widespread non-compliance with the off-payroll rules in the public sector

•    Concerns about the timing to the proposals with respect to Brexit

ContractorCalculator CEO Dave Chaplin said: “Our analysis has uncovered a host of practical and ethical issues with HMRC’s proposals for the private sector, and presents the most prominent feedback in a balanced manner.

“Following HMRC’s previous off-payroll summary of responses, we simply don’t trust the taxman to deliver an accurate representation of the feedback provided. Too often we have seen HMRC gloss over and blatantly ignore the concerns shared by respondents.”

Several points of critique were the same as or similar to criticisms raised in a previous consultation in September last year.

The main critique centres on the impact that the changes will have on the flexible workforce, deterring contractors from entering the market and making it harder for organisations to find the right talent when they need it.

Some organisations called for a full review into the impact of similar rules introduced in the public sector in 2017.

Although many respondents recognised that the government will try to limit the impact on smaller businesses, some raised concerns that the exemption would be too complicated to implement and that larger organisations would be able to circumvent the responsibility.

The Freelancer and Contractor Services Association (FCSA) said that its biggest concern with the proposals was that disagreements would be led by the client, rather than an independent party.

On this point, IPSE commented: “It is against natural justice that the dominant party in the process should be empowered to lead the disagreement process.”

Almost every respondent called for a delay to any legislation until 2021, arguing that HMRC had not given businesses enough time to prepare for a 2020 rollout.

Miles Grady, Director of Umbrella.co.uk, said: “Taken together, the responses to HMRC’s consultation serve as testament to the strength of feeling against the proposed IR35 changes from those representing the tax, business, recruitment and legal sectors.

“The fact that many of these criticisms have already been raised in previous consultations and following reforms introduced in the public sector show that policy makers are deaf to any criticism of their damaging proposals.”

For more information about the IR35 changes and how they could affect you, speak to a member of the team today. Call: 0800 121 6513.