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.”
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.”
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.
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.