Private sector rubbishes Treasury timetable to reform IR35 by April

The impact of the short, shoehorned, London-centric, six-event-only IR35 reform review is troubling huge swathes of the staffing industry, the tax industry and the contractor industry.

Several recruitment bodies like APSCo and REC, and tax body the ATT, say the impact is so adverse that the reform needs shelving.

Individual firms like Hays want a delay to 2021 too.

The consensus is that the review’s length (six weeks) is too short, and its proximity to Budget 2020 too close, to make the raft of legislative tweaks needed for the reform to be workable.

'Blanket decisions'

Aside to considering what may be recommended, ‘if anything at all’ according to one expert, the strong signal that the review won’t stop the reform is set to accelerate ‘blanket’ decisions.

In a rush, and with budget constraints but knowing that the Treasury says the reform will  apply on April 6, an accountant said engagers would now see blanketing as the tempting option.

That suggests a problem will be reoccurring -- engagers making decisions on pre and post-April contracts ‘without seeing the final legislation and without seeing HMRC’s guidance.’

This is tax body the CIOT’s concern, as is engagers not having to tell PSCs they are small (so are exempt), and engagers not having a HMRC refunds system for PAYE/NIC overpayments.

These are on a long list of vital tweaks which the body has put out but doubts can get done in time because, even if all three are recommended, legislators have only a few weeks to enshrine them.

The problem is; there are many other bodies each with their own individual lists of legislative amends, and none sound confident of squeezing them into the government’s timeframe.

'Give this the time it desperately needs'

Perhaps Hays’ UK and Ireland managing director, Simon Winfield, summed it up best when, referring to HM Treasury yesterday, he said:

“If they are undertaking additional consultation now until mid-Feb and the reforms are coming into effect from April, there simply isn’t enough time to give this the attention it so desperately needs.”

Or as APSCo’s legal counsel Tania Bowers puts it: “This timeline just doesn’t work.”

She explained: “There is a clear need for a proper review, with adequate time to publish the outcome and recommendations of the review, and then roll out changes with certainty on final legislation.”

'Don't expect much to change'

Only a review that doesn’t recommend anything major would appear to be more conducive to the time so far allocated.

And it’s a prospect that tax expert Helen Christopher is betting on.

“It seems to me that there will be little room or chance of any amendments and that this date signals the government’s intention for full steam ahead with the changes from April 6.

“In fact, I don’t expect much if anything is to change,” adds Christopher, operations director at Orange Genie. “And many [engagers] are still not ready and are underestimating the size of the task.”

'Six roundtables at HMRC London'

It is the size of the review itself that bothers Tom Hadley, policy director at the Recruitment & Employment Confederation.

“The review will consist of six roundtable discussions at HMRC’s London offices within the coming weeks,” he said.

“We know from experience that the proposed IR35 legislation, as it stands, will have unwanted consequences. So it is disappointing that the review won’t be looking into the legislation itself, as we had hoped, and will limit engagement from outside of London.”

'Technology sector to be hit hardest'

As it supplies staff to companies in the capital, Hays is hopeful that the government will work with it as part of the review, “given that we’ve already dealt with this in the public sector.”

But that experience doesn’t mean the recruiter is ready for the fallout in the IT sector.

“The IR35 reforms will hit technology harder than any other market,” Mr Winfield warned, before describing the proposals as presenting “a very real risk as they stand.”

The FTSE-listed agency boss added: “Introducing them [on April 6th 2020] will counter any investment in this area. A number of industries are suffering from niche skills shortages and these reforms could worsen these gaps”.

The more pressing, practical issue is just how fast agencies and their customers need to make “significant changes to their systems and processes,” says the CIOT’s Colin Ben-Nathan.

'Complex payroll systems'

His concern is that with the final legislation for IR35 reform not expected until March 11 at the Budget, firms will have just a few weeks to overhaul their “complex” payroll systems.

“We are disappointed that there is no intention [from the government] of delaying [the] incoming [IR35] changes,” reflected Ms Bowers, at APSCo.

“Although more than three-quarters of the professional recruitment firms [we have] polled believed that most of the businesses they work with were ‘aware’ of the incoming changes, just 51% said the majority of their clients were ‘actively preparing' ’for the updated legislation.”

'HMRC guidance wasn't correct'

According to law firm Harbottle & Lewis, many affected parties have wondered why the final legislation and HMRC guidance have not yet appeared, so that preparations could be made with confidence.

The firm’s Yvonne Gallagher said: “The [review] announcement looks as though the government is seeking to respond to concerns expressed about the impact of the proposed legislation and the very real difficulties in assessing to which entities the legislation applies

“While HMRC initial guidance described the test of status as straightforward, in reality it is no such thing.”

'Sanity and sensibility'

Insolvency advisory Clarke & Bell reflected: “Rolling out Off-Payroll into the private sector is already having a huge impact on businesses and contractors, affecting the livelihoods of many contractors and impeding hiring decisions by firms.”

The advisory’s co-founder John Bell added: “Whilst a review is welcome, I don’t think a thorough one can be conducted in such a short period of time.”

At Orange Genie, Ms Christopher enforced: “We cannot take much comfort from the announced ‘review’.

“They are only going to consider how the changes have been implemented and what if any more support they can offer, as opposed to the review which is needed and which was indicated -- a wholesale review of the sanity and sensibility of the new rules.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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