What needs to happen to IR35 in 2018
Any hope the government has of winning back the political support of contractors rests in 2018 with its officials rethinking its position on IR35, writes Seb Maley, chief executive of Qdos Contractor.
Research we carried out soon after the 2017 General Election told us that 97% of contractors did not believe Theresa May’s Conservative government had their best interests at heart. And it’s hard to imagine that the time in-between, and even yesterday’s haphazard reshuffle would have changed that stat.
With reports this week that prudent movers and shakers in the money markets are nervously speculating about the possibility of a Labour government, it seems to us that five things must be done around IR35 if the Conservatives -- supposedly the most business-friendly party -- are to receive the much-needed support of the UK’s micro-business, contractor community next time the polls open.
The five are:
Approach the chancellor’s promised IR35 consultation with an open mind
The government says it will consult on recent and potential IR35 reform in 2018, but it’s imperative for them to do so with an open mind and to honestly assess how this legislation currently affects contractors.
The government must actually consult with UK businesses and the contracting community before any further reform is announced. An open dialogue with the people that IR35 reform impacts is essential. Ruling out further changes entirely would go some way to convincing contractors that this government is a supportive one.
Get HMRC to take an objective approach to IR35 investigations
Late last year, HMRC began policing newly introduced rules in the public sector. While we are yet to hear of a formal IR35 investigation pertaining to the rules, we cannot stress how important it is that the government ensures that HMRC approach any enquiry in 2018 objectively. This means its inspectors must -- without prejudice and pre-determination -- assess the facts of the working arrangement in question.
Ensure the NHS makes well-informed IR35 determinations
Soon after public sector reform was introduced in April last year, the NHS made a blanket determination and placed its entire contract and locum workforce inside IR35. This initial stance has since been reversed, but we understand that significant numbers of contractors are yet have their working arrangement reviewed individually.
From this month onwards, the government must stress to all public bodies the importance of case-by-case IR35 assessments, particularly if it wants the NHS to continue attracting the thousands of locum and contract workers that it so clearly relies on.
Review ‘CEST’ -- the tool built to make IR35 determinations
Rechristened as CEST, having initially been the ESS, the IR35 digital tool has produced a number of inaccurate IR35 decisions since its delayed release last year. The government must prioritise a review of the tool’s effectiveness, because it is clearly flawed. The worry is that this tool had been used some 450,000 times between April and October of 2017. But how many of these determinations would actually stand up in court?
Assess the relationship between tax status and employment rights
The government seems set on reducing the tax benefits of working for yourself. Despite independent workers insisting they would prefer to work without employment rights, the government must revisit the relationship between tax status and employment benefits in 2018.
The government needs to realise that it’s only fair that independent workers are offered certain benefits by the state, particularly if they are made to effectively pay the same taxes as an employee should they be working under IR35.
Our New Year’s message to the government
"To repair your fractured relationship with independent workers in 2018, you must look at building a tax system that genuinely works for those brave enough to strike out on their own. Specifically, we’re urging you to review your position on IR35 for the good of the UK’s growing community of risk-takers and entrepreneurial minds.”