Government’s review into IR35 private sector reform criticised by experts

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The Government’s commencement of its review into planned changes to IR35 has been lambasted by a number of experts. The off-payroll working legislation is due to expand into the private sector on April 6th, when medium and large end clients will take on the responsibility for determining their contractors’ IR35 statuses.

The Government was called upon to “act immediately” after the Chancellor, Sajid Javid, pledged to review the legislation in December, and it has now confirmed that it will consult on the reform until mid-February. 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 purpose of this consultation is to make sure that the implementation of these changes in April is as smooth as possible.”

However, Freelancer & Contractor Services Association CEO, Julia Kermode, described the announcement as “nothing short of an insult”, commenting: “The review [focusing] on the implementation of the reforms rather than the reforms themselves …is not what was suggested [by the Chancellor] …I fear that today’s [announcement] is simply the Government paying lip-service to empty election promises”.

Qdos CEO Seb Maley also warned that holding a review does not mean the changes will be abandoned, urging contractors to “assume changes will be enforced and prepare immediately”. He added: “HMRC itself said this review is to make sure reform is implemented smoothly, suggesting the Government has every intention of rolling out needless changes irrespective of any findings.” Former tax inspector Carolyn Walsh agreed with Mr Maley’s assessment, advising: “Contractors should carry on taking action to manage their way through the off-payroll working rules, or rather their hirers’ application of them. Remember, even if the April 6th rules do get shelved, hirers have already started viewing contractors, particularly agency workers, in a different light.”

Additionally, experts have suggested the Government’s decision to only consult until mid-February is an inadequate timeframe to enact any meaningful change to the reform. Andy Chamberlain, from IPSE, called on the Government to “urgently reconsider”, adding: “It must give more time for a full review that includes an impact assessment of the changes in the public sector and the likely effects on the private sector.” Mr Maley echoed this statement, saying: “Given the legislation applies to payments made on or after 6th April, which typically covers work carried out in March, there is very little time for the Government to make any improvements once the review has concluded in February”.

Brookson Legal said it at least hopes the review will encourage businesses that use a large number of contractors to rethink blanket decisions made as a result of IR35, such as Royal London and Northern Trust: “The best that can be hoped of the review is that it will address the concerning trend of [businesses] bypassing their obligations under the new rules by enforcing blanket bans on the use of contractors in their supply chains.”

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