IR35 reform must be delayed

5 reasons why IR35 reform must be delayed

Recruitment body calls for delay of IR35 reform

Despite the Government making it clear in the Off-payroll review launch that it intends to roll out IR35 reform in April, recruitment body, The REC, continues to lobby for at least a delay of the incoming changes. 

On 6th April, contractors working with medium and large private sector companies will lose the right to decide their own tax status. Similar to public sector changes introduced in 2017, the client will decide if a contractor belongs inside or outside the IR35 legislation.

Given incoming reform also impacts recruitment companies, that will carry the IR35 liability if they operate as the ‘fee-payer’ in the supply chain, The REC has regularly highlighted its concerns.

For example, the association’s Director of Policy and Campaigns, Tom Hadley, reacted to the recent opening of the IR35 review, stating: “It is disappointing that the review won’t be looking into the legislation itself, as we had hoped.” Mr Hadley then said the need to delay the implementation was “urgent.”

The REC also put forward a measured argument for delaying IR35 reform, outlining five reasons why it believes the Government must reconsider imminent changes…

1. IR35 reform is “rushed”

Due to recent political uncertainty, the final IR35 legislation has not yet been published. With only a handful of months to go until changes are enforced, The REC argues that “rushed, last-minute legislation is hard to implement properly, and it is vital to get good legislation and compliance right from the outset.”

2. Public sector analysis needed

Introducing reform in a matter of months doesn’t allow the Government to properly examine the true implications of public sector changes, The REC explains: “Delaying until 2021 would enable the Government to assess the effect of the legislation, including a full impact assessment of the IR35 public sector changes.”

3. Lack of IR35 awareness

Even now, too few businesses are aware of IR35 reform. According to The REC, this is why the changes must be halted: “Businesses’ awareness of the changes is low, and the Government gave assurances in 2018 that companies would have time to implement the final legislation. It now looks like the legislation won’t be finalised until March 2020, which leaves only a few weeks for firms to get to grips with any final changes before implementation.”

4. Good Work Plan must bed in

The REC says the recruitment industry needs time to implement four of the recommendations in Matthew Taylor’s Good Work Plan, which also come into effect this April. In addition to Brexit, recruiters must deal with the arrival of the Key Information Document, the repeal of Swedish Derogation, written statement and holiday pay changes. The staffing body’s view is that recruiters have enough on their plate as it is. 

5. Umbrellas need regulating 

With fears remaining over the compliance of the umbrella industry, The REC believes that delaying April’s changes would mean the Government could flush out non-compliant umbrellas: “A delay would allow the Government to regulate umbrella companies, something which it has long promised. Without this regulation we risk non-compliant umbrellas prospering, facilitated by IR35 changes.”

In conclusion and to reinforce The REC’s view of IR35 reform, Tom Hadley urged the Government to think again: Businesses may have just weeks to make sweeping reforms to their payroll at what is already an extraordinarily difficult time as Brexit uncertainty and skills shortages take their toll on employer confidence. Getting IR35 right and learning from the lessons of the past is critical.”

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