New Qdos Contractor research suggesting that nearly one in three contractors have felt ‘bullied’ into entering a working arrangement which only benefits the engager, is the latest indication that the Government’s IR35 strategy is not working.
HMRC’s haphazard approach to IR35 compliance was recently played out in public after reports emerged that – for a number of years – it was BBC policy to give presenters no choice but to work through their own limited companies or face having their contract cancelled.
One presenter in particular, who chose to remain anonymous, told The Telegraph: “We were never given the option of being staff. This was industrial level tax avoidance by The BBC.”
An investigation published by The Times last week said this practice could have helped The BBC avoid paying millions in tax. As you might remember, this story first came to light after HMRC launched an IR35 investigation into presenter Christa Ackroyd’s status, and it was concluded her contract clearly resembled employment and not one of service.
Following these revelations, there have been growing concerns over the number of workers pressured into entering an agreement designed to protect the engager and not the individual. And that 30% of contractors have felt bullied into this – similar to BBC presenters – does indicate this mistreatment of workers is more common than perhaps first feared.
While the recently kicked-off IR35 consultation does touch on the need for contractors to receive greater protection when it comes to status decisions, extending reform to the private sector is arguably not the answer – not if the Government has genuine hopes of helping contractors.
In short, extending IR35 changes would give end engagers the power to set a contractor’s status themselves, much like in the public sector. Should further reform be introduced, the bullying of workers might well stop (because it would be engagers setting IR35 status, not the worker) but that isn’t to say the accuracy of these assessments would improve – regardless of whether these contractors end up working inside or outside the rules.
In the current climate, making clients responsible for IR35 determinations leaves contractors more exposed and vulnerable. With no real say over their own status, contractors are – contrary to the Government’s theory – less protected at this moment in time. The public sector’s risk-averse approach to IR35 following reform is evidence if ever you needed it.
Unsurprisingly, The BBC’s apparent mishandling of IR35 looks as though it could do some damage, with 73% of independent workers telling Qdos Contractor that – irrespective of their profession – they would not work with the broadcaster due to this reason.
And should these contractors’ opinion of The BBC carry across to the many broadcast, digital and media freelancers it relies on, this globally renowned organisation could struggle to recruit independent workers in future.
For businesses to attract contractors and subsequently benefit from flexible working arrangements, it’s vital end engagers rigorously and objectively assess the individual’s status.
Granted, the boundaries between what constitutes as employment and self-employment remain unclear, and the IR35 legislation is needlessly complex to this day, especially for inexperienced public sector engagers now tasked with the job of setting status.
That said, not understanding the rules is no excuse to encourage – or even bully – workers into arrangements that serve only to the benefit of the engager.
With these statistics in mind, is it fair to say the Government – that has invested so much time and energy in contractors’ suspected tax avoidance – has ignored the activity of the organisations engaging these workers? Perhaps.
There is one thing we can be certain of though. HMRC must set out a structured plan to police IR35 effectively or risk non-compliance on a whole new level, particularly if they push on with further reform – an ill-advised move, but one our sector is wisely preparing for nonetheless.