The Government launched its much-anticipated review into proposed changes to the IR35 legislation and faced an immediate backlash, with one expert describing it as “inadequate.”
After having been urged to “act immediately” on the promise the Chancellor made in December to review IR35, the Government has announced that it will consult on controversial reform until mid-February. This is less than two months before the introduction of the reform, which will see contractors’ medium and large private sector clients take on the responsibility for deciding IR35 status.
As part of the review, the Government plans to invite industry specialists to attend “a series of roundtables” to help “gather evidence from affected individuals and businesses to ensure smooth implementation of the reforms.” Issues such as CEST, HMRC’s IR35 tool, will be discussed and evaluated. As will the performance of similar changes introduced in the public sector in 2017.
Financial Secretary to the Treasury, Jesse Norman, explained his reasons for holding a review: “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, the fact that the Government is exploring ways to make reform work, rather than considering delaying or, better still, scrapping April’s changes is a problem in itself, explained Qdos CEO, Seb Maley.
“While a review is a sign of progress, it doesn’t mean the changes will be scrapped. HMRC itself has 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.”
As a result, Mr Maley urged contractors, agencies and private sector businesses “to assume changes will be enforced and prepare immediately.”
Meanwhile, IPSE’s Andy Chamberlain, who described the details of the review as “disappointingly hasty and inadequate”, was particularly critical of the Government for allocating “far too little time for a full review.” He is of the opinion that the limited nature of it “would leave the freelance sector floundering.”
Mr Maley also touched on the timeframes, which give the Government little chance to manoeuvre. He said: “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.”
Having been criticised for introducing public sector changes in 2017, before announcing plans to extend a version of this reform to the private sector, questions have regularly been asked by industry experts of whether the Conservative Party is supportive of independent working.
Following the launch of the IR35 review, frustrations surfaced at the Government’s blinkered approach to reform. This was something IPSE’s Andy Chamberlain focused on: “During the election, Sajid Javid said the Conservatives were ‘on the side of the self-employed’. It must not be one of the first acts of this Government to let this commitment slide.”
In the IR35 review document, which you can read here, the Government claimed that “the off-payroll working rules do not affect the self-employed, as only those working like employees are in scope.”
This was a point Qdos CEO, Seb Maley, addressed: “That HMRC is still under the illusion that IR35 reform only affects those ‘working like employees’ also shows just how out of touch the Government is with regards to the true impact of the changes.”
With the countdown on to 6th April and the introduction of the changes, IPSE’s Andy Chamberlain encouraged the Government to put a halt to incoming reform while an independent review is conducted.
“The Government must urgently reconsider. 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. And for the integrity of the review, it must make sure it is independently chaired.”