IR35 Consultation - is HMRC really listening?

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I’ve previously put plenty of my thoughts on IR35 ‘reforms’ to paper, primarily during the run up to the April 2017 Off Payroll in the Public Sector legislation, and several since. Any of you contracting or using contractors in the public sector will now undoubtedly have had some experience of the effects of this legislation.

It’s still clear to me that this legislation, in order to correctly deem contractors who should be caught under IR35, unfairly treats many others who should be outside IR35, but are caught inside due to the lack of understanding from many in the public sector, and understandably so.

With HMRC losing several high profile cases due to the complexities around IR35, how is the public sector in general supposed to fully grasp it.

Now it is to be rolled out into the Private Sector! It is still under consultation but as a starting point it is using the existing public sector legislation, with the client making the determination and the fee payer, where the contractor is deemed inside, is responsible for the deductions of employer’s and employee’s national insurance and PAYE.

The one ‘saving grace’ is that this will not apply to ‘small’ business, although what constitutes a small business is still to be confirmed.

Any changes or updates to the rules based on the existing public sector legislation will apply to both the private and public sectors.

Sadly, the consultation does not consider whether this reform is appropriate or whether it should go ahead. It is going ahead!

It also does not consider any alternative ways of dealing with non-compliance, or the interaction between employment rights and tax.

We, as a company, are ‘fortunate’ enough to have experience of these changes and have robust processes to ensure the correct application of the rules for those deemed inside who continue to work through their personal limited company rather than an umbrella.

At least this time those affected may be given more than 2 weeks to get their houses in order, which was precisely the time we were given in March 2017!

If you are a contractor or use contractors and would like to understand the proposed changes in a little more detail, please get in touch.