HMRC OPEN IR35 CONSULTATION

The much anticipated consultation into IR35 has been released, detailing the government’s proposed changes in order to tackle non-compliance in the private sector.

Unsurprisingly, at the top of HMRC’s list of proposed changes is an extension of the public sector reform to the private sector, although alternatives have been presented including encouraging businesses to secure their labour supply chains and additional record keeping.

Alternatives already ruled out include the introduction of a freelancer limited company structure, the client paying employer NICs, a flat-rate withholding tax, and a minimum length of engagement option – where workers on short term contracts would be unaffected by the off-payroll rules.

Given the timing of the consultation, stakeholders should remain prepared for the possibility of an April 2019 rollout of any agreed changes. However, the consultation document confirms that no decisions have yet been made, with the government taking time to consider the evidence of how the public sector reform has gone.

Public sector shortcomings

Although HMRC regard the public sector reforms as a success, having raised an estimated additional £410 million, there has been widespread criticism of the way the changes have been implemented.

The consultation document does acknowledge the shortcomings of the public sector reforms, suggesting that any solution should not be “disproportionately burdensome to administer for clients, PSCs and agencies.”

Another hit for contractors?

Given the well-documented challenges faced in the public sector, and a lack of faith in the CEST tool, could a rollout to the private sector be another hit for contractors?

Julia Kermode of the Freelancer Contractor Services Association comments,

“HMRC is already over-stretched and the public sector changes were not implemented properly.  In recent times, we have seen a number of tax policy changes introduced which have simply served to penalise the contingent workforce and the businesses that support them,”

We urge anyone affected by the proposed changes to join us in responding to the consultation, which will run until 10th August.

You can read the consultation document in full here.

 

 

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