“IR35 is a blunt instrument that HMRC has never been properly funded to enforce.” This is what Samantha Hurley, operations director of the Association of Professional Staffing Companies (APSCo) and co-chair of the HMRC IR35 forum said to Jesse Norman, chief secretary to the Treasury regarding IR35.
Ms Hurley said:
We believe that IR35 is a blunt instrument which HMRC has never been properly funded to enforce. The off-payroll changes will drive many genuinely self-employed professionals to leave self-employment entirely or abandon their Personal Service Companies to work within an umbrella company, as was the case for many independent contractors working within the public sector in 2017. Consequently, we also believe that the new rules will continue to drive increasing levels of non-compliant payment models, which the Government has been unable to get under control.
APSCo question the review of IR35, as it gave more time for businesses to prepare, however, we are now in late January 2020 and no-one has seen any final legislation and so do not know fully what to expect.
The association also questions the Check employment status for tax (CEST) as there are numerous concerns relating to its accuracy. The CEST tool is also being evaluated as part of the review.
Ms Hurley added:
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.
When IR35 was introduced to the public sector the CIPD and the Association for Independent Professional and the Self-Employed (IPSE) found that more than half of public sector hiring managers felt that they had lost skilled contractors while nearly three-quarters (71 per cent) were facing challenges in retaining contractors.
Darius is the editor of HRreview. He has previously worked as a finance reporter for the Daily Express. He studied his journalism masters at Press Association Training and graduated from the University of York with a degree in History.
Everyone seems to want create panic and to give the impression that contractors will all suddenly evaporate when these regs come into force – encompassing talk of problems of retention and contractors leaving the sector.
Where are they going to go ? What will they do ? Live on fresh air ? Sit at home with their feet up ?
No, they’ll need to work somewhere – they will have skills that they can utilise to complete work that needs to be done. All we are talking about here really are the financial arrangements and the sad fact that they’ll need to pay tax like the rest of us.
Unless of course, they have amassed such personal wealth through not paying much tax so far (at the expense of the rest of us) that they can afford to retire in their mid-30s.
I’m sorry but I don’t agree with the previous contributor. People in Contract roles DO pay tax. As a Limited Company I generate VAT and Corporation tax for HMRC (and you!) and have to work hard on whatever opportunities I can get, (normally short term projects requiring a specialism) wherever they are for however long I am needed; if you don’t perform as a contractor you are out the door (no employment law to sit and hide behind). I then have to find another project to work on, so it’s a feast and (more often) famine existence, often with periods of no income. Contractors don’t get the benefits of paid holiday, pension contributions, life assurance or job security that I assume people like you do. This should be factored into your equations. I have been a somewhat reluctant contractor for 15 years, (dictated by supporting my wife who has had a debilitating long term illness, my disabled father in law who lived with us for five years and my mother who is living with Alzheimers). I am approaching 60 years of age, so chances of FTE are slim, despite the espoused ‘equality’ employment statements, I drive a car ‘Columbo’ would be proud of and will be lucky if I get to retire ever. So sir, don’t use this as an opportunity to have a go at all contractors for whom I will wave the flag and who make a massive contribution to the economy.
Many clients are offering the contractors a fixed term PAYE option, so 35% less earned without benefits or stability.
The majority will accept to ensure they are still working through this transition period, but only a short term fix for the end clients.
Once the IR35 hysteria has cleared and the clients can see who is outside the criteria with the help of their suppliers those genuinely exempt, will continue with their PSC status others through umbrella solutions.
Many clients are closing off the contract roles altogether not satisfied that an umbrella solution will remove all risk, this blanket reaction will damage clients wanting to hold on to skilled talent, their competitors adopting different more flexible approaches will harvest these skills.
Some are assessing long term contract roles and whether they should be contract as are in an operational environment,perhaps rightly so.
I hope once the dust settles all will go back to normal, during this period we may expect contractor numbers in the UK to fall in the short term.