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“Recklessly inadequate” IR35 review published

Government’s IR35 review response predictably “disappointing”, say specialists

The Government’s response to its review into IR35 reform has been widely criticised by sector experts for being underwhelming, not genuine and, according to one IR35 specialist, “recklessly inadequate”.

Having launched the IR35 review early in January, the Government published its findings on 27th February, which is less than two months before the reform will be extended to the private sector on 6th April. And despite including minor tweaks to IR35 changes, the review was described by Qdos CEO, Seb Maley as “disappointing, albeit unsurprising.” 

This feeling was echoed by IPSE’s Andy Chamberlain, who condemned the Government for conducting the review itself: From the start, this review has been recklessly inadequate. Not only was it not independently chaired; it was also rushed out of the door in less than two months.”

IR35 reform “soft landing” a “red herring”

In the response, the Government explained what the Chancellor meant when he recently promised a ‘soft landing’ to IR35 reform. The document states that HMRC will not impose “penalties for errors relating to off-payroll in the first year, except in cases of deliberate non-compliance.”

While this development has been welcomed in some quarters, Qdos CEO, Maley, described it as a “red herring,” explaining that “it only applies to ‘penalties’, not necessarily tax liability owed as a result of inaccurate IR35 determinations. Therefore, private sector companies should not pay too much attention to this.”

Meanwhile, IPSE’s Andy Chamberlain, said the “tweaks proposed” go “nowhere near far enough. If anything, this tinkering shows the Government knows the changes to IR35 will be immensely disruptive to business and contractors, but plans to forge ahead regardless.”

Some clarity for overseas contractors

The Government announced that contractors working with “wholly overseas” organisations will remain responsible for their IR35 status from 6th April. It is stated that the legislation will be amended “to exclude wholly overseas organisations with no UK presence from having to consider the off-payroll working rules.” 

While contractors may need to wait until the final legislation is published for a firm definition of “wholly overseas”, Qdos’s Maley was quick to point out that “this isn’t a concession to contractors – it’s because HMRC would not be able to police” IR35 abroad.

IR35 review was “lip service”

The Government has again promised that reform will not be retrospective, meaning contractors who transfer inside the legislation will supposedly not be at risk of an IR35 investigation. In addition, plans were included to help identify ‘small’ companies (which will be exempt), while the Government also reiterated that it intends to fully support businesses with the implementation of reform.

However, the lack of substantial change as a result of the IR35 review has led experts to question whether this consultation was launched with the right intentions. Qdos CEO, Maley, for example, said Westminster has “clearly ignored calls for a genuine review into IR35 reform, with the findings suggesting they were simply paying lip service to appease critics.”

You can read the Government’s full response here.

By Contractor Weekly

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15 thoughts on ““Recklessly inadequate” IR35 review published”

  1. DirkDastardly

    Is it any surprise when the chancellors father in law will profit from the implementation of these rules. Another whitewash, just like the loan charge review!

    • JK

      Absolutely. It’s the big Indian IT companies that will be the beneficiaries of this reform. If anything tax revenue to the HMRC will decrease. And umbrella companies are rubbing their hands in glee. Another needless layer added to the chain for contractors.

    • G

      As long as everyone does what Boris tells them and it doesn’t affect him I doubt he cares what cream they skim off the top. Probably encourages it, tbh, seeing it as ‘a perk’ of their privileged position.

  2. John Morton

    I thought we were in a Democracy, IR35 seems like a Dictatorship to me.
    I’m every year the HMRC gains from the Tax I pay them, but IR35 has given me a reason to retire, instead of many more years paying taxes.
    So HMRC it’s your loss and I know many hundreds if not thousands of one man companies will quit their company or retire.

    • Rick Fryer

      I agree, I have already made the jump from contracting as I am fed up with the attacks. I am seeing more and more contract roles being advertised for prolonged time. What does that tell you.

  3. gg2

    What does the UK want to tell to the world post Brexit? 1) We are strapped for cash and will skin the contractors (one of our most talented skill force) so the hell with the economy, or 2) We highly value and will cherish this very flexible work force that will be one of the major forces in post Brexit UK?

  4. Guy eastwood

    1. If you voted Tory based on the promise of this review you deserve everything tha’s coming in the next 5 years. The rest of us don’t, however.

    2. Utterly unsurprising outcome, I said 3 months ago this would essentially be ‘We were right, business as usual’

    3. WTF is a ‘Small’ company and when will anyone know so they have ‘time’ to make any appropriate adjustments.

    4. Maybe time to work exclusively with offshore clients, perhaps with a bank account or other financial arrangement to suit.

    • mick

      and if you voted labour what would of the difference been? IR35 wouldn’t of got a review they would of just out right banned PSC’s put corp tax up to 26% forcing a lot of companies to shut up shop or cull the work force… the list goes on. people who voted tory voted the best of a really really rotten bunch.

  5. Phil the Pill

    Pointless exercise that will cost far more to administer than it will ever collect. Given that HMRC should be concentrating on post Brexit stuff and going after the Big Fish this is a poor use of scant resources.

  6. Rasta

    I read the HM Treasury Report and got as far as “This led to a situation where two individuals working in the same way would pay
    different levels of tax if one of them worked through a company.” As far as I am concerned there is no such thing as “Tax”. What they appear to be referring to colloquially as “Tax” is in fact “Income Tax” & “Employees National Insurance”. Do they realise that as a Contractor operating my own Limited Company that I have to pay “Employer’s National Insurance Tax”, “Value Added Tax” and then if there are any profits I have to pay “Corporation Tax”. Additionally I am unentitled to Sick Pay and Holiday Pay, I then have to purchase Public Liability Insurance and Professional Indemnity Insurance up to £2m. So the comparison of ‘different levels of tax’ is classic public sector miscalculation and fundamentally incorrect.

  7. Jay Bhayani

    Same as Brexit. Will will cost more than it’ll bring in.
    I think we are living at a bad time in a bad place.

    • mick

      right??? leaving a corrupt despot has nothing in common with this! this was implemented back in 2000 by the infamous Blair government! illegally joining the eu destroyed this countries ability to stand on its own two feet, it decimated manufacturing, agriculture and fishing. now we have a chance to get it back. got to WTO add import duties to imported items so that home made items can compete once again and we can make/produce in our own country! and perhaps bring back our own manufacturing base along with it more apprenticeships.

  8. Gazza

    I really did not expect anything more than this. None of the political parties appreciate why PSCs came about and, it seems, can’t be arsed to preserve this means of providing flexibility for fair reward. At the risk of sounding selfish, I have been fortunate enough to ride the contracting wave since 1990 and it’s been good (and hard graft!), so at age 60 this year I am going to hang up my articles of association before I’m put inside ir35, and do something different. If it works I’ll let you know. Sorry chancellor old bean, I’ll be spending it elsewhere in future. Best of luck to you all.

  9. JoJoSan

    Nothing can be expected from those institutionalised jobsworth that never made anything
    No responsibility for anything… including outcome
    Unaccountable
    Can never be sacked
    Public service averse
    Faceless
    Empty eye sockets
    Golum

  10. Jon Rawlings

    New guidelines have recently appeared which may change the status of some roles. Most companies made their decision months ago!

    Looking at the recently updated guidelines it appears to state that if a contractor has lodging costs then they are deemed outside IR35?. How on earth are medium to large companies going to handle this? Also how will they advertise whether a new contract is inside or outside?

    You couldn’t make it up if you tried!

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