Not enough time for full off-payroll review say industry bodies

Recruitment and freelancer trade bodies have raised concerns over whether the timing of a review into off-pay working rules will allow MPs sufficient time to effectively scrutinise the reform.

Yesterday afternoon, the government delivered on a pre-election promise to launch a review of changes to off-payroll working rules.

The review, which will determine if any further steps can be taken to ensure the “smooth and successful” implementation of the reforms due to come into force on 6 April 2020, will also assess whether any additional support is needed to ensure that the self-employed, who are not in scope of the rules, are not affected.

It concludes by mid-February and will engage affected individuals and businesses on their experiences of the implementation of these reforms.

But that tight deadline has not gone down well with recruitment and freelancer trade bodies.

Neil Carberry, CEO of the Recruitment & Employment Confederation, said: “Pushing ahead with an approach to taxing contractors that is not fit-for-purpose will punish ethical businesses, incentivise non-compliance and harm workers. A review is the right call, and it’s good to see opportunities for engagement have opened up. But it would make sense to delay the implementation date while a full, independent review takes place. 

“Delaying will allow MPs to properly take stock of the impact the legislation will have, and to regulate non-compliant umbrella companies which could prosper under IR35 as it is currently conceived. Importantly a delay will afford businesses a more reasonable amount of time to prepare at a time when they are facing an unpredictable economy and major skills shortages.”

Tania Bowers, legal counsel at the Association of Professional Staffing Companies (APSCo), expressed disappointment the government had not delayed the incoming changes, adding they require a proper review and the timeline simply didn’t work.

“Essentially, with just weeks to go until the changes are implemented, we are now at a point where we don’t have any certainty around final legislation or any firm guidance from HMRC. New rules apply from March for firms running monthly payrolls – this 11th-hour review is simply too late.

“A survey of APSCo’s membership, undertaken in December 2019, revealed that although more than three quarters (79%) of the professional recruitment firms 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.

“There is certainly a feeling among some that this review is just a formality, with the government obliged to follow through with a commitment that the chancellor made publicly last year during the run-up to the General Election. Regardless of the catalyst for this announcement, we at APSCo are always open to engaging with the government to ensure the voices of our members are heard by policy makers and we expect to meet with HMRC as part of this review.”

Meanwhile Julia Kermode, CEO of professional membership body The Freelancer & Contractor Services Association (FCSA), accused the government of carrying out another meaningless review, with the intent on bulldozing ahead with its plans anyway.

“They are expecting the review to be completed by mid-February, which is simply not long enough to consider the deeply complex range of issues that the off-payroll legislation is throwing up. HMRC has stated that they will be continuing its preparations to roll out the reforms in April come what may. We have also learned today that the review will focus on the implementation of the reforms rather than the reforms themselves, which is not what was suggested and is not what is needed. I fear that [the] pledge is simply the government paying lip-service to empty election promises and nothing short of an insult.”

And Andy Chamberlain, deputy director of Policy at IPSE (the Association of Independent Professionals and the Self-Employed), described the review as “disappointingly hasty and inadequate”.

“Right now, across the sector, contractors and freelancers are panicking at the prospect of these disastrous changes. Major businesses, including most of the large banks, have already announced they will no longer engage contractors out of fear they will fall foul of the notoriously complex legislation. Even before the new rules take effect, they are precipitating a crisis among the self-employed.

“During the election, [Chancellor] Sajid Javid said the Conservatives were ‘on the side of the self-employed’. It must not be one of the first acts of this government to let this commitment slide.”

But Dave Chaplin, CEO and founder of contracting authority ContractorCalculator and director of the Stop The Off-Payroll tax campaign, who has been a long-standing opponent of the reform and who last summer took his campaign to Parliament, said he was delighted government was delivering on it promise of a review.

“It demonstrates that it is still willing to listen to the thousands of contractors who have been expressing their concerns to their MPs as part of the Stop The Off-Payroll tax campaign.

“Let’s hope we now have a chancellor who will not just listen but will react and will stoke the furnace of the self-employed sector, rather than his predecessor Phillip Hammond, who through his reforms, has strangulated it.

“Pushing ahead with this contract jobs killing measure will be insane as we leave the EU. Reliance on a flourishing flexible workforce will be vital. We look forward to the full review and would encourage the chancellor to now repeal Chapter 10 in its entirety to reverse the damage already done to the public sector.”

And Seb Maley, CEO of contractor insurance provider Qdos, warned while a review is a sign of progress, it doesn’t mean the changes will be scrapped. 

“HMRC itself has said this review is to make sure reform is implemented smoothly, suggesting the government has every intention of rolling out needless changes irrespective of any findings.

“That HMRC is still under the illusion that IR35 reform only affects those ‘working like employees’ also shows just how out of touch the government is with regards to the true impact of the changes.

“Taking everything into consideration, our advice to contractors, agencies and private sector businesses is to assume changes will be enforced and prepare immediately.”

Matt Fryer, head of legal services at professional services firm Brookson Group, agreed, adding the wording of the statement clearly indicates that there will be no last-minute policy U-turn. 

“The best that can be hoped of the review is that it will address the concerning trend of large users of contract labour bypassing their obligations under the new rules by enforcing blanket bans on the use of contractors in their supply chains. It would also be helpful to have further clarity on responsibility for IR35 compliance within the supply chain, as this will be a key issue for businesses working with recruitment agencies moving forwards. 

“Finally, we would expect a ‘soft landing’ post-April, with HMRC using the first 12 months to continue to educate, rather than seek to punish businesses who have not been able to get their house in order.”

Nicola Hayman, legal manager at contractor insurance provider Kingsbridge, echoed those sentiments.

“We are urging the businesses that we partner with to continue to prepare for incoming reforms – there simply isn’t time to wait for the outcome of the review and final legislation… 

“Even when using HMRC’s own calculations, the vast majority of PSC contractors are genuinely self-employed – and recruiters should communicate this fact to any clients who may be spooked by the recent flurry of blanket bans so that they don’t consider implementing their own veto on contractors.

“In our experience, good recruiters are happy to place genuine contractors outside of IR35, and will work with employers to determine the status of these individuals, helping the client to overcome reasonable care requirements.”

Nick Woodward, CEO and founder of back-office solution for the freelance recruitment sector ETZ Payments, added: “Considering that MPs in the government were openly calling for this review, the fact it has happened so quickly in the new year shows HMRC’s commitment to this, and hopefully, the review and its recommendations will give all players enough time to adjust ahead of April.”

Finally, John Bell, founder and senior partner at licensed insolvency practitioners Clarke Bell, added he did not think a thorough review could be conducted in such a short period of time.

“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. Contractors have been coming to us for advice on closing down their limited companies as a direct result of the IR35 changes, and I doubt this review will do anything to change their minds.”

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