Use IR35 reform delay due to covid-19 wisely, contractor experts echo

An alert by the SNP’s shadow chancellor that the delay to private sector IR35 reform due to the coronavirus outbreak ‘must be used wisely’ is being echoed by industry advisers.

Glasgow Central MP, Alison Thewliss, issued it to HMRC as by reforming a rule found last month by peers to be flawed, the taxman is “building a house on the sand,” she said.

But industry says it too should put the 12-month delay to good use. “Businesses must continue their preparations,” says Qdos, speaking after an attempt to delay the reform failed.

“With less than a year until IR35 reform arrives in the private sector…companies that haven’t started yet, must get to work.”  

The IR35 advisory added: “By taking a measured approach and prioritising accurate assessments, firms can continue to compliantly engage genuine contractors outside IR35.”

'Very clear'

The advice comes just 24 hours after Treasury minister Jesse Norman said: “determinations must be based on individuals’ contractual terms and actual working arrangements.”

Speaking to MPs on Tuesday to rule out delaying the reform beyond April 2021, the minister claimed the government “has been very clear” on the compliant way to make determinations.

Actually, there have been a few iterations from HMRC of what it regards as law-abiding status decisions, including a practice it once deemed ‘appropriate’ being changed to ‘correct.’

That is in addition to its latest stance that ‘blanketing’ is compliant if a decision on one PSC’s contract is applied to all other PSCs, where those others have identical terms and practices.

'Change their contractor balance'

But in his address to MPs, Mr Norman failed to acknowledge that the hassle of getting SDSs’ right (and the tax risk if they don’t), is driving many engagers to no longer engage PSCs.

“Some organisations have clearly decided to change the balance of their employees and their contractors,” the minister began, sounding like he was going to make the acknowledgement.

“[But] this can be for many reasons,” he added, seeming to suggest reform isn’t the driving one. “For example, where that better suits the evolving business model of that organisation.”

'Organisations might be blanketing'

Moving to a topic he has form on -- blanketing, which advisory WTT Consulting today writes on exclusively for ContractorUK, the minister stuck to his stance that it still isn’t definitely happening.

In fact, he said his fellow MPs have concerns that organisations “might” take a blanket approach -- only for the MPs to then say organisations have blanketed, and are still blanketing.

Labour MP Meg Hillier said: “Since the government announced the extension of IR35 [reforms] to the private sector, many companies in my constituency are already taking…a very risk-adverse approach.

“[They are] designating all contractors as requiring and needing to go under the IR35 umbrella. And that is having this negative downward drive on those technical, skilled individuals”.

'Treasury is intent'

In his comments, Mr Norman indicated that the existence of a strong contractor lobby, and the client-led disagreement process, should help call out non-compliant status decisions.

“It’s clear, from listening to [the minister], that the Treasury is intent on raising tax receipts and sees IR35 as an area in which to do so,” says Qdos’ Dominic Johns.

“With this in mind, private sector businesses mustn't pin their hopes on another last-minute extension.”

The status firm added: “It’s therefore imperative that private sector businesses continue preparing for next year's roll-out.

“Meanwhile, the businesses that have banned contractors altogether or blanket-placed these workers inside the legislation should reconsider their stance”.

'Dramatically negative effect'

“These reforms are actually likely to have a dramatically negative effect on our [country’s] freelancers and contractors,” says Ed Molyneux, CEO of accounting platform FreeAgent.

“Many…will essentially be pushed into quasi-employment but without any of the protections that they would receive if they were actual employees.”

He added: “The government had a great opportunity to provide some much-needed relief for this sector during these challenging times, but instead it chose to doggedly push on with an agenda that is likely to harm the UK economy.”

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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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