The Government has concluded its review of IR35 with numerous contracting groups criticising the review claiming it was just “lip service” as the legislation will still be enforced on the 06/04/20 and the ‘light touch’ approach enforcement in the first year will create more problems than it solves which Chancellor of the Exchequer Rishi Sunak suggested on the 25/02/20.
Seb Maley, CEO of Qdos, who offers insurance and tax advice for the self-employed said:
The Government has clearly ignored calls for a genuine review into IR35 reform, with the findings suggesting they were simply paying lip service to appease critics. Issues around the check employment status for tax (CEST) tool, HMRC’s level of support and ways contractors can contest unfair IR35 decisions still stand. With IR35 reform only a month away, the response from government is very disappointing, albeit unsurprising.
While applying a ‘light touch’ to reform for the first 12 months has been welcomed, this is a red herring. It only applies to ‘penalties’, not necessarily tax liability owed as a result of inaccurate IR35 determinations. Therefore, private sector companies should not pay too much attention to this.
Taking the IR35 review into account, my advice to private sector firms is to continue preparing without relying on HMRC for support. Prioritise accurate IR35 decisions, do not rely solely on CEST and above all else, avoid risk-averse and panicked assessments.
This is the typical tin-eared approach taken by the Treasury who has continued to ignore the valid concerns of businesses that are already suffering considerably because of this unworkable legislation. The art of taxation is supposed to be about plucking the goose with the minimum amount of squawking. You’re not supposed to kill the goose. Businesses that want to invest in the UK want to do so with tax certainty. We’re already seeing work being moved offshore making the UK an unattractive place to do business.
The Recruitment and Employment Confederation (REC) and the Association of Independent Professionals and the Self-Employed (IPSE) were urging Mr Sunak, to suspend the IR35 tax legislation which has obviously fallen on deaf ears.
Sophie Wingfield, director of policy at the REC said:
Taking a ‘light touch’ approach to enforcement in the first year will create more problems than it solves. The consequences of not complying with tax law should be clear. Not doing so could create an unlevel playing field where compliant employers lose out to unethical ones. We need to see more details about how this approach will work in practice. What’s obvious from this is that the Treasury know IR35 is not quite right. Rather than tinkering around the edges of this complex legislation, we need the government to delay implementation until 2021 to make sure it’s done properly.
However, Ms Wingfiled also said:
It’s a positive move that the Treasury is putting the obligation on small businesses to declare whether the IR35 rules apply to them. This is a direct response to what the REC has been calling for and should provide recruitment businesses with much needed clarity on their obligations.
Susan Ball, employer solutions partner at RSM, a provider of audit, tax and consulting services said:
All in all, there is little new in this review and those hoping for wholesale change will be disappointed. On the other hand, those organisations and individuals who have done the necessary prep work prior to the rules coming into force in April will be relieved that the goal posts haven’t moved.
However, the Association of Accounting Technicians (AAT) saw the review coming to a conclusion a positive, as Brian Palmer, policy adviser at ATT said:
With the government having already previously postponed the extension of off-payroll working to the public sector and with just weeks remaining until implementation, AAT believed that further delay had little realistic chance of being delivered. We’re therefore pleased that the government has instead confirmed that there will be a soft landing period until April 2021.