MPs have met in Westminster to debate the public sector rules and private sector proposals. Many spoke on behalf of contractors in their constituencies, giving insight into the impact of the rules on individuals and their businesses. Ged Killen MP said, “In many ways, the IR35 rules are a stopgap in the journey towards a statute book that supports 21st-century employment practices and the realities of modern workers’ lives. I have no doubt that the objective of the reforms is correct, but their implementation threatens to scupper any associated benefits.”
Referencing the Taylor review, Mr Killen spoke of the detrimental impact of the flawed rules on both the individual contractor and on the UK economy, which needs urgent access to a flexible workforce as the uncertainty around Brexit drags on. He suggested that the government lacked the “necessary bandwidth” to follow the reviews recommendations, which highlighted disparities with CEST and the need for greater alignment between tax and employment status. Quoting one of his constituents, Mr Killen illustrated the decision that many contractors are facing: “Ultimately, if the benefits are removed from me and I am actually paying more tax than a regular employee, with none of the rights, then I have a difficult choice to make.”
Ruth Cadbury MP echoed these concerns, elaborating on the detrimental effects that IR35 was having on the recruitment sector. She spoke of an NHS recruitment agency in her constituency that had experienced a 60% drop in business. The removal of the 5% expense allowance for those caught by IR35 has meant that that many NHS contractors, who typically work at many locations according to demand, can’t claim their travel expenses. Other issues raised were CESTs chronic failures, which have led to many contractors being wrongly classified as inside IR35. HMRC’S poor track record at tax tribunals was used to illustrate this, with their recent defeat in the Lorraine Kelly case lending critics of the reforms strong ammunition.
Several MPs were vocal in their assertions that Government has consistently failed to heed warnings from the public sector in proposing near-identical plans for the private sector, which will be rolled out next year. HMRC’s recent consultation document does little to address on-going concerns, instead shifting much of the responsibility of IR35 determination onto the client. Industry bodies have welcomed the decision by MPs to stand up for the contracting sector and expose issues with the ill-conceived policy in Westminster. However, they accused the government of continuing to read from the same old script with their stock responses to MP’s questions.
Plans to extend the off-payroll rules to the private sector by April 2020 mean that increasing numbers of contractors are at risk of being caught by 1R35. A new survey of REC members’ readiness for IR35 changes indicates that 91% have no awareness of IR35 changes coming into effect. Contractors need to be aware of how IR35 rules could apply to them and should familiarise themselves with its key concepts such as Mutuality of Obligation and Right of Substitution, ensuring awareness of what can trigger an IR35 investigation. Read our comprehensive IR35 guide for an overview that covers all the bases.
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