The Chief Secretary to the Treasury has met with one of the UK’s most respected staffing bodies to discuss soon to be reformed off-payroll working rules, it has emerged.
News that Jesse Norman spoke with APSCO’s Operations Director, Samantha Hurley, who is also Co-Chair of the HMRC IR35 Forum, is likely to be welcomed by those affected by IR35 reform. This is due to the concern that still surrounds the arrival of the changes, which will be introduced on 6th April*.
When the announcement was made in 2019 that IR35 changes would be extended to the private sector this April*, the recruitment industry, along with contractors and private sector firms, lobbied strongly against the introduction of reform.
Even at this late stage, recruitment bodies are working hard to convince the government to reconsider. In Samantha Hurley’s recent meeting with the Treasury chief, the APSCO Director outlined the specific reasons why she has ‘major concerns’ about IR35 reform, which we’ll reveal in this article...
Reform timetable is unrealistic
Despite the government having already delayed the changes once, businesses still aren’t ready to implement them properly, explained APSCo. Due to the recent general election, the final legislation still hasn’t been published. Assuming that it’s unveiled in the Finance Bill on March 11th, Ms Hurley explained that recruiters have major concerns around the timetable for changes:
It is likely that it (the legislation) will be published around a month or less before the implementation date. In reality, most businesses (both recruitment firms and end-clients) are waiting for the legislation to be published before taking action. Some preparation may have taken place, but final processes can’t be developed until they are sure of the detail of the legislation.
That recent APSCo research indicates only half of businesses affected by the reform are actively preparing for the roll-out was also highlighted.
Changes could spark further non-compliance
The effectiveness of the IR35 legislation itself was called into question by Samantha Hurley, who is of the opinion that off-payroll changes could not only damage the contractor workforce but also contribute to a rise in the number of non-compliant umbrella schemes. Focusing on this concern, she explained:
“The new rules will continue to drive increasing levels of non-compliant payment models, which the government has been unable to get under control. There is a strongly-held view amongst our membership that they are still encountering large numbers of umbrella/third party companies offering non-compliant schemes to contractors. In fact, since the introduction of the public sector rules the number of inappropriate/non-compliant models we’ve seen via our legal helpdesk has grown massively.”
CEST is still a problem
HMRC’s IR35 tool, ‘Check Employment Status For Tax’, was criticised by Ms Hurley, who told Mr Norman that its flaws have meant agencies and end-clients are left with no choice but to engage the help of a specialist when assessing IR35 status. She explained that HMRC has not taken this additional cost to recruiters and businesses into account:
While HMRC has developed the CEST tool as a no or low-cost option for businesses when making determinations, there are concerns about its accuracy. Due to these concerns, many of our members and their end-clients (like many public sector departments before them) are having to consider extra expenditure on other external suppliers to make determinations.
The public sector has suffered
Why introduce changes in the private sector when public sector organisations have been negatively impacted by similar measures? Given research conducted by IPSE and the CIPD found that more than half of public sector firms feel they have lost skilled contractors due to reform, while nearly three quarters still face challenges in retaining contractors nearly three years later, APSCo’s Hurley remains unsupportive of changes:
We believe that off-payroll reform in the private sector will have a huge impact on high value and growth sectors of the economy which rely most heavily on independent contractors for their skills and flexibility, such as pharmaceuticals and technology – the consequences of this reform cannot be underestimated!
While this was a damning assessment of changes to off-payroll working rules, many recruitment firms have offered the government their support to ensure the reform is implemented successfully at least.
Meanwhile, the fact that Jesse Norman himself, the Chief Secretary to the Treasury, is personally speaking with industry experts perhaps shows that HMRC is taking on board some of the advice of those who know the legislation best.
How Parasol can help
Whether you have questions around the IR35 reforms, or are looking for a fully compliant umbrella solution please get in touch with our Best Advice team on 0800 464 0631 or email firstname.lastname@example.org
*Update: at the time this article was written, the off-payroll (IR35) reforms were due to be implemented on the 6th April 2020. On the 17th March 2020, the UK government announced that it would be deferring the reforms to the 6th April 2021 to help businesses and individuals during the COVID-19 crisis.