Contractors to make the most of IR35 reform’s 12-month ‘soft-landing’
Contractors hope that the Treasury’s promise of off-payroll enforcement for the first 12 months being ‘light-touch’ will lead clients to ‘re-touch’ their IR35 stances.
But it is just a ‘hope,’ not an expectation, as just over three-quarters of such PSC workers do not believe the ‘soft landing’ vow is going to prompt engagers to reassess their IR35 policy.
Even among the hopeful, only a slim majority (53%) say a client using the HMRC ‘concession’ to rethink off-payroll decisions would only lessen them looking for work elsewhere.
“A ‘soft landing’ presents few opportunities, but it could be used to manage flight risk,” said inniAccounts, which surveyed more than 2,500 PSCs to produce the findings.
“[The soft-landing] can buy clients time to review their IR35 approach. If this is communicated clearly [to PSCs] and followed through with…it could mitigate [any exodus].”
'Smoke and mirrors'
But not all advisers are as optimistic. “[I see the soft-landing] as smoke and mirrors,” says Graham Webber, director of tax at HMRC dispute advisory WTT Consulting.
"HMRC will have no real information on those who contracted in 19/20 and were employees in 20/21, until April 2021 at the very earliest. Conveniently, that is 12 months from now and also the entire soft landing period.”
Carla Roberts, the advisory’s director of legal services, also takes issues with the soft-landing, but on different grounds.
“The promise to take a ‘light touch’ on penalties and to not use information resulting from the changes to the rules to open a new compliance check, should provide reassurance.
“However,” she explained, “they have stated that this promise will not apply where there is evidence of deliberate non-compliance or fraudulent behaviour.
“It begs the question, ‘How will HM Revenue & Customs know if there is such behaviour unless they investigate?’ This is a big carve-out for them.”
'Creates more problems than it solves'
Also objecting to the 12-month commitment, and therefore at odds with the IoD and the AAT (both of which support it, at least in part), is the Recruitment & Employment Confederation.
“Taking a ‘light touch’ approach to enforcement in the first year will create more problems than it solves,” warns the confederation’s Sophie Wingfield.
“The consequences of not complying with tax law should be clear. Not doing so could create an unlevel playing field where compliant employers lose out to unethical ones.”
Julia Kermode, CEO of the Freelancer & Contractor Services Association, sees it similarly.
“We’re cautious that this [soft-landing] may cause more confusion, if clients and contractors are misled into thinking that the legislation has been delayed or will not be enforced,” she said.
“The soft landing does not mean that businesses and individuals can plan to ignore the changes because HMRC has also confirmed that penalties will be applied where there is deliberate non-compliance.”
'PAYE underpayment not covered'
Shyam Pattani, a director at tax consultancy Chartergates, is also advising about what the ‘soft-landing’ doesn’t mean.
“This ‘soft touch’ approach is limited only to penalties and not to any underpayment of PAYE that may result from not adopting the rules correctly,” she said.
As to the 12-month concession having other unintended, practical consequences, inniAccounts’ CEO James Poyser is hoping that there will be at least a few.
“We think [end-clients] will use this soft-landing to reassess their approach to deliver fair IR35 [results].
“[Although] this will take some time, we expect to see a delay in the issuing of determinations in the coming weeks, with clients thinking [more] carefully about assessments,” he said.
'Work with what you've got'
Status advisory ReLegal Consulting reflected: "[Somehow] the government is still maintaining that it values the contribution of flexible workers but….[it’s] ‘business as usual’ and they will plough ahead with implementation on 6 April.”
The advisory’s founder Rebecca Seeley Harris added: “The only concession is that there will be a ‘light touch’ approach from HMRC for the first 12 months.
“It’s a shame that it has taken this long [to come about], and that we are so close to the 6 April. But, my best advice is ‘accept it and work with what you have got.’”