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Consultation on IR35 private sector reforms closes- experts respond

By PaperRocket Accounting, Aug 14 2018 02:41PM

As we spoke about in our last blog, last Friday, the government consultation on how to tackle IR35 non compliance in the private sector closed. At this point in time, HMRC are analysing the feedback received via this consultation, although whether they pay much attention to it remains to be seen.

Whilst HMRC seem to be convinced that extending public sector reforms (introduced in April 2017) to the private sector would help tackle non compliance and claw back some of the £millions that they believe this non compliance is costing the Treasury, many industry experts vehemently disagree.

‘Don’t do it, and definitely don’t do it anytime soon’

This was the response from IPSE (The Association of Independent Professionals and the Self Employed). IPSE believe that these reforms would be “short sighted”, especially in light of the ongoing uncertainty around Brexit and the effect that will have on the UK economy and workforce. They believe that this measure will damage the UK’s flexible workforce which is arguably our greatest competitive advantage.

In their response, they do concede that it is looking more likely that the government will roll out these reforms than not, so their main recommendation is to not do it too soon. With the lack of public faith in HMRC’s CEST tool, as well as HMRC losing in a number of IR35 tribunals recently, IPSE poses the excellent question “how can the government expect businesses to make complicated IR35 determinations when HMRC, with all its expertise and resources, can’t do it”?

‘Do not extend the off-payroll reform to the private sector’

The response from contractor insurance providers Qdos Contractor focussed strongly on the effect that the reforms have had in the public sector thus far- reforms which they say have had a “significant, detrimental impact on thousands of workers who were genuinely operating outside IR35”. They included survey responses from contractors, as well as a number of detailed written responses to support their case.

They believe that HMRC already have the tools to hand to enable them to identify where they feel there are potential risks earlier, and they “strongly believe that a case-by-case assessment… is the only manner in which to apply IR35”.

Proposing an ‘innovative solution’ instead

The FCSA (Freelancer and Contractor Services Association) took a different tack with their response to the consultation and instead proposed an alternative to the proposed reforms- the ‘Enhanced Reporting and Enforcement Solution’. This will allow personal service companies to retain responsibility for IR35 status, but will just tighten up compliance by getting end hirers and intermediaries more involved through sharing information which in turn, will be reported quarterly to HMRC to allow them to undertake more targeted enforcement activity.

The FCSA claim that HMRC’s various assumptions regarding how many PSCs are non compliant and how much this non compliance costs the treasury are over inflated and just being used to “push through legislation outside of the allowable timescale”.

So, whenever the outcome of the consultation feedback is announced, there are going to be a lot of people with a lot to say about the result- whatever that may be.

PaperRocket Accounting provide accounting and tax services to professional limited company contractors and freelancers working in the UK.

We offer our clients a choice of four all-inclusive fixed fee monthly packages which cover all of their accounting and tax needs (so no hidden costs or surprise bills!). All of our accounting packages include a monthly subscription for a cloud accounting software subscription provided by the awarding winning FreeAgent.

Each of our clients is given their own dedicated qualified accountant with unlimited access in person, telephone, or by email.

We pride ourselves on our client satisfaction and customer service and were shortlisted as 'Welwyn Hatfield Business of the Year 2018' in the SME Hertfordshire awards, 'Small Practice of the Year 2016' in the AccountingWEB practice excellence awards, as well as FSB Hertfordshire Service Excellence finalists in 2015 and 2016.

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