IR35 'should be up to contractors, post-Brexit'

A sense of ‘in with the new’ that the Brexit vote has created among policy-makers is no excuse to introduce a new way to operate IR35 in the public sector, an agency body believes.

But the UK’s decision to leave the EU smacking of ‘out with the old’ reflects the need to axe the “antiquated” Supervision, Direction or Control test in the agency tax rules, says the ARC.

“Whatever the outcome [of Brexit], there is a strong sense that change is afoot,” said the Association of Recruitment Consultancies (ARC), whose member firms place IT contractors.

Adrian Marlowe, ARC’s chair said: “Whilst there is an air of change, let’s take the opportunity to present a strong vision that addresses long-standing issues.”

Chief among them in the association’s view is IR35, which should be left “as a matter for the contractor and HMRC” and not, as proposed from April, a matter for the ‘paying agent.’

“To make agencies and hirers liable for determining employment… is not in the interests of the recruitment industry,” Marlowe added.

“All agency workers [should instead] be paid on a PAYE basis, or if they operate through a PSC they should be paid subject to an ‘on account’ deduction, similar to the CIS.”  

The ARC thinks that all HMRC’s status tests cause “division and promote inequality,” given that self-employed agency workers can get tax reliefs that their PAYE counterparts cannot.

“Guidance [on the 2014 false self-employment legislation from HMRC] does little to assist, and the government does not seem to care that the tests cause unfairness,” Marlowe said.

“Government needs to change the tax law on agency worker supply, so that there is one simple taxation rule for all supplied workers regardless of the status the worker

“[And as] all agency workers and contractors are supplied, a test on the basis of supply alone would simplify the position for everyone.”

Other ideas that the ARC has to simplify the recruitment, tax and employment landscapes feature in the association’s 2016 manifesto: ‘Post-Brexit, a better place to do business.’

Among them is a plan to adopt a single overarching policy for the staffing sector; a tax break for all agency workers; and the removal of employment rights claims by agency workers.

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