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What’s next for IR35 in the private sector?

By PaperRocket Accounting, Nov 28 2017 03:00PM

Not for the first time, there were a lot of people watching the Budget last Wednesday with a sense of foreboding. It seemed a dead cert that Chancellor Philip Hammond was going to announce that the controversial IR35 reforms that have already caused no end of problems in the public sector, were going to be rolled out to the private sector. Scathing articles were written, contractor forums were full of speculation, petitions were signed- it was surely a case of when, not if.

And then… nothing! We had Brexit, jokes, Stamp Duty, more jokes, railcards… but no mention of the dreaded IR35 reform. Was this announcement going to be hidden in the Red Book (the 93 page document that accompanies the Budget with the ‘nitty gritty’ details) instead?

Well, not exactly. There was no announcement of the legislation rolling out into the private sector, but instead, the Chancellor stated that the government would be looking into how this has affected the public sector, and staging consultations to discuss the impact of bringing it into the private sector.

What exactly was said in the Red Book?

Section 3.7 of the Red Book stated:

“The government reformed the off-payroll working rules (known as IR35) for engagements in the public sector in April 2017. Early indications are that public sector compliance is increasing as a result, and therefore a possible next step would be to extend the reforms to the private sector, to ensure individuals who effectively work as employees are taxed as employees even if they choose to structure their work through a company. It is right that the government take account of the needs of businesses and individuals who would implement any change. Therefore, the government will carefully consult on how to tackle non-compliance in the private sector, drawing on the experience of the public sector reforms, including through external research already commissioned by the government and due to be published in 2018.”

And what does this actually mean?

At the moment, it is still rather vague. We do not know who is conducting the external research, and neither do we know when any consultations will take place. However, the hope is that the independent research is carried out thoroughly and highlights to the government the already damaging effect that it has had on the public sector.

Throughout 2018, it is likely that we will see large and small businesses in the private sector stepping forward to have their say on why the reform would be a disaster. CEO of IPSE, Chris Bryce, has stated that they are “ready to join the consultation to ensure it takes into account the needs of the legitimately self-employed and accurately reflects the heavy damage the changes to IR35 have caused to the public sector.” They are also urging all contractors to write to their local MPs to have their say on the negative impact that rolling out this legislation will have.

Even Unite, the UKs largest trade union, has warned that extending to the private sector ‘could result in tens of thousands of workers being taxed like millionaires’.

After months of speculation and concern amongst contractors, this is the best outcome we could have realistically hoped for from the Budget. However, when it comes to IR35 and the private sector, we are certainly not out of the woods yet, and 2018 is surely bound to be a pivotal year.

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 '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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