Search Magnifying Glass

Chaos over employment status looms

More money to spend on public services, but chaos over employment status looms…

It was reported in The Guardian that, in July, Britain had the biggest budget surplus since 2000, and more income was apparently received in tax than was spent by the Government on public services. The changes to IR35 in the sector could well have played a part in this, as HMRC have claimed that an additional £410m has been remitted since the legislation was implemented.

The surplus was reported to have amounted to £2bn so not all of this was due to IR35 reform in the public sector, however the supposed success of IR35 reform in the public sector will undoubtedly spur HMRC on to plough ahead with introducing IR35 reform within the private sector, now with the rhetoric of being able to put more funding into the NHS.

The consultation stage for IR35 reform in the private sector closed on 10th August, and whilst we await the Summary of Responses document, all signs point towards the legislation being introduced from April 2019, which will effectively bring all contractors under the same IR35 rules, where the end client will have to determine employment status and those contractors who are considered to be employees will have their tax deducted at source.

According to The Guardian, the OBR said the surplus is due to less departmental spending. What is somewhat ironic, is that although the Government may be spending less money, such as on engaging contractors, they may struggle to obtain the resources they need to deliver crucial services.

This comes at a time when the future of the economy is uncertain due to Britain’s exit from the EU, which has rendered the Chancellor unable to announce a specific date for the Autumn Budget.

Additionally, the issue of ‘employment rights’ in general has entered the spotlight due to IR35 reform. The new rules determine contractors to be employees but fail to provide contractors with any of the employment rights they should have if placed within IR35, and which would be given to an employee from the start of their engagement. This has recently been highlighted after a contractor successfully claimed unpaid holiday from HMRC, for whom she had worked as a contractor from 2016 but had not received employment rights once she was placed within IR35 and set up on agency payroll.

HMRC wants to forge ahead with reform of the IR35 rules but without changing any of the fundamental rules over employment status, and the recent case highlighted above could be the first of many. There could be thousands of contractors claiming tax refunds (effectively wishing to appeal the decision made over their employment status) which could result in a huge upsurge in required resources for HMRC and potentially the Tribunal’s service, but also cause a hindrance to HMRC’s estimated £410m remitted in tax.

Out of the many IR35 tribunal cases recently heard, HMRC have won only one case, which should demonstrate to HMRC that they have got something wrong. The consequences could be further reaching than anyone could have anticipated, with Brexit negotiations still underway and with a reported lack of resources in the UK’s most critical public services.

By Contractor Weekly

Comments

Add a comment

2 thoughts on “Chaos over employment status looms”

  1. Soprano

    “The consultation stage for IR35 reform in the private sector closed on 10th August, and whilst we await the Summary of Responses document, all signs point towards the legislation being introduced from April 2019”

    I wouldn’t be so sure.

    • Big Bird

      Some of the money probably from sugar tax as people go back to their wicked ways.

      HMRC will try to apply it to private sector. You guys have nowhere to run one Brexit happens and you can’t work in Europe. Britain will be a tax haven just not for the working masses!

Leave a Reply

Your email address will not be published. Required fields are marked *