IR35 in the private sector – 17 months to get it right!
One ray of light from Philip Hammond’s latest budget comes in the form of a delayed implementation of the Off Payroll rules in the private sector (more commonly known as IR35) – although the fact that he confirmed that it WILL be rolled out in April 2020 was not quite as positive given the farce that it has been in the public sector.
The problems have been multiple, with blanket decisions made by public bodies as to whether or not the rules apply, resulting in unfair, incorrect or illegal taxing of contractors, and unfair liability risk for the fee payer (often and usually the agency). Even when blanket decisions have not been made, the HMRC’s own CEST tool for making the decisions is questionable at any level of its ability to give a fair and correct decision.
HMRC will continue to deny it but many contractors left the public sector (and HMRC’s own projects) to work in roles that did not deem them an employee under IR35, and where they remained, the clients often experienced significantly increased costs. When this legislation moves to the private sector it will strangely not apply to companies with less than 250 employees – will we see a similar move of contractors to smaller clients and an increased cost to larger ones? It does not feel like a level playing field.
In 2017, the public sector and the contractor and agency community were given about 2 weeks to prepare after the final legislation was released (yes, you read that correctly, 2 weeks). At least now we have been given 17 months notice to educate our clients and contractors and implement relevant IT systems, HMRC has 17 months to get its own affairs in order and give us all a toolkit fit for purpose, and the government has 17 months to come to a fair decision as to who is liable for the decisions made by the end client.
I won’t hold my breath.