Recruitment industry leaders have joined forces to lobby the Government and call for the delay of changes to the Off-payroll working rules.
In a letter signed by fourteen recruitment organisations, the Chancellor of the Exchequer was encouraged to halt April’s IR35 reform, which the signatories said would “risk poorer treatment of contractors and compliant companies losing out to those who bend the rules.”
On 6th April, the Government will introduce changes to the IR35 rules that mean contractors will no longer determine their own IR35 status unless they are engaged by a ‘small’ private sector business. Medium and large private sector firms will take on this responsibility. Similar changes were also rolled out in the public sector in 2017 and apply to all public sector organisations.
The letter highlighted the problems experienced by the public sector, stressing that an assessment of these reforms is “fundamental to a genuine review” of the private sector changes, which is currently being held.
With “much evidence which shows there are ongoing issues with public sector reform”, recruitment specialists have emphasised the importance of fixing these problems before private-sector changes are introduced. It’s likely that this is in reference to continued reports of blanket decisions, which force contractors inside IR35 regardless of whether their engagement belongs inside or outside the legislation.
The letter states: “There is no point in creating difficulty in the private sector when it can be avoided through lessons learned in the public sector.”
The recruitment sector’s “primary concern” is the potential for non-compliance in the umbrella industry. The firms that signed the letter say huge opportunities for tax avoidance will be created, given “the effective regulation of umbrella companies the Government has promised will not be in place in time for April.”
Because some contractors are considering working through an umbrella company in response to IR35 reform, the letter was also a useful reminder that independent workers should also carry out their own due diligence when engaging the services of one.
The Loan Charge should show the Government “what happens when badly designed changes are implemented”, the letter explains. As a result, lessons must be learned and the Government should not enforce reform until 2021 at least: “Government must be prudent and apply lessons from the loan charge to the IR35 reforms in the private sector. This is even more pertinent given the other significant legislative changes related to the Good Work Plan and Brexit which employers are already busy with.”
HMRC must “adopt an independent Chair and body” to review IR35 reform, the recruitment organisations advise. This isn’t the first time industry experts have made this point. After the launch of the IR35 review at the start of the year, the Government was heavily criticised by IPSE, in particular, because it announced it would conduct the review itself.
The letter states that an independent review would “enhance the legitimacy of the Government’s final position and win business confidence.”
Private sector businesses won’t be ready to implement the rules successfully by April, these recruiters have said. This is because the IR35 review hasn’t yet concluded and the final legislation for reform hasn’t been published. As the letter details: “The current timetable leaves only 17 working days between the publication of final legislation on March 11 and implementation on 6 April.”
These staffing specialists did, however, offer their “full commitment” to the Government, as they look to help Westminster get reform “right.” But in order for this to be a possibility, the Recruitment & Employment Confederation, that signed the letter, emphasised the importance of a delay, which “would allow MPs to properly take stock of the impact the legislation will have.”
You can read the letter in full here.