Too little too late? IR35 review gets luke-warm reception

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Date: 14 January 2020

HMRC building

The government has launched a review of the upcoming changes to off-payroll working rules but its scope is limited to ensuring a smooth transition when the new rules come into force in April.

Off-payroll working rules, known as IR35, introduced in 2000, were designed to ensure that someone working like an employee, but through a company, pays similar taxes to other employees.

The reforms, announced in the 2018 Budget, make medium and large organisations in the private and third sectors responsible for determining the tax status of contractors. This requirement has already been introduced in the public sector.

The promise of the review was made during the election campaign by chancellor Sajid Javid. It is intended to "determine if any further steps can be taken to ensure the smooth and successful implementation of the reforms". It will also evaluate the Check Employment Status for Tax (CEST) tool and make sure that the self-employed, who are not in scope of the rules, are not impacted.

Jesse Norman, financial secretary to the Treasury, said: "We recognise that concerns have been raised about the forthcoming reforms to the off-payroll working rules … The review, which will conclude by mid-February, will engage with affected individuals and businesses on their experiences of the implementation of these reforms."

However, the Association of Independent Professionals and the Self-Employed (IPSE) has said the review does not go far enough.

Andy Chamberlain, IPSE deputy director of policy, said: "The review … is disappointingly hasty and inadequate. Not only has the government not said it will pause the changes, it has also allocated far too little time for a full review and said nothing about selecting an independent chair.

"Right now, across the sector, contractors and freelancers are panicking at the prospect of these disastrous changes. Major businesses, including most of the large banks, have already announced they will no longer engage contractors out of fear they will fall foul of the notoriously complex legislation."

IPSE is urging the government to "urgently reconsider". It is calling for a full review that includes an impact assessment of the changes in the public sector and the likely effects on the private sector.

The Association of Professional Staffing Companies (APSCo) has also taken issue with the scope and timing of the review. Tania Bowers, APSCo legal counsel, said: "There is a clear need for a proper review, with adequate time to publish the outcome and recommendations of the review, and then roll out changes with certainty on final legislation. This timeline just doesn't work.

"We fear that this move will encourage some employers, recruiters and contractors to further postpone preparations due to ongoing uncertainly until mid-February when the review concludes - and by then the deadline will be imminent."

On a more positive note, Dave Chaplin, ceo and founder of ContractorCalculator and director of the Stop The Off-Payroll Tax campaign, said he was "delighted that the government is holding firm on its promise to conduct a full review".

He said: "It demonstrates that it is still willing to listen to the thousands of contractors who have been expressing their concerns to their MPs."

However, he added: "Pushing ahead with this contract jobs killing measure will be insane as we leave the EU. Reliance on a flourishing flexible workforce will be vital. We look forward to the full review and would encourage the chancellor to now repeal Chapter 10 in its entirety to reverse the damage already done to the public sector."

The government has also promised to conduct a separate review to explore how it can better support the self-employed.

Written by Rachel Miller.

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