Chancellor fails recruitment industry as coronavirus spreads and IR35 reforms hit contractors

The recruitment industry was disheartened at Chancellor Rishi Sunak’s failure to make mention of the extension of IR35 into the private sector in his Budget speech.

With coronavirus now a pandemic, recruitment trade bodies expressed dismay at government’s decision to proceed with off-payroll rules into the private sector, while the secretary general of the Independent Health Professionals’ Association (IHPA) has called for the urgent suspension of the rules to help fulfil the chancellor’s promise to give the NHS all the help it requires to tackle the spread of the coronavirus.

Ahead of Chancellor Rishi Sunak’s Budget speech yesterday, the Recruitment & Employment Confederation called for a delay to the extension of IR35 (off-payroll rules) into the private sector, while the Association of Professional Staffing Companies (APSCo) urged government to legislate for a proper definition of the self-employed.

While the chancellor committed to giving the NHS all it needed to tackle the coronavirus, he didn’t explicitly reference the off-payroll rules in his Budget speech. However, IR35 was touched on in the Budget papers, with point 2.178 of the documents confirming the extension of the off-payroll rules would proceed as planned.

Commenting on the confirmation, Tania Bowers, legal counsel at the Association of Professional Staffing Companies (APSCo), said: “In an ideal world, we would, of course, loved to have seen the Budget statement include a delay to planned reforms and a comprehensive review of employment status for tax and rights. However, this isn’t something we were realistically expecting to materialise. Let’s not forget that HMRC’s latest review into IR35 was only ever going to look at how the planned changes should be implemented. The ‘light touch’ approach to penalising businesses for the first year, which has since been announced, at least offers our members a little extra time to adjust.

“That said, since the compliance statement was published by The Treasury, it has been predicted that up to 20% of the UK workforce are likely to be off work at any one time due to the coronavirus pandemic. This begs the question: can they expect business to shoulder this additional burden of change?”

Meanwhile Tom Hadley, director of policy at the REC, said it was disappointing to see government “ploughing ahead with ill-conceived IR35 tax changes”. 

“Businesses don’t have time to prepare and now is completely the wrong time for a huge regulatory shake-up,” Hadley said. “Today was a missed opportunity to delay IR35 to give businesses time and space to focus on protecting their workforce during the current disruption.”

But touching on the chancellor’s commitment to the NHS, Dr Iain Campbell, secretary general of the IHPA and chairman of the self-employed alliance, said in a statement that while measures to draft in retired doctors and medical students might help a little, they are vastly inadequate, and to protect patients the off-payroll reforms must be urgently suspended.

“What we are seeing in Italy is that intensive care beds quickly fill up. There is some capacity to expand these, however this will be of no use if we cannot adequately staff these additional beds. Rishi Sunak stated in a Sky News interview with Sophie Ridge that he will give the NHS whatever it needs. It is now vital to patient safety that these reforms are suspended and I call upon him to make good on this promise for the safety of our patients.”

Julia Kermode, CEO at membership body for compliant umbrella companies FCSA, said she was shocked that the chancellor made absolutely no mention of IR35 or the off-payroll reforms in his budget speech.

“The omission is insulting, to say the least, for our sector; not just to the many thousands of professional contractors who will be affected by the off-payroll reforms, but also to the House of Lords, trade bodies and the many MPs that have raised their concerns about these reforms to the government.

“As expected, the Budget 2020 Red Book confirms that the off-payroll legislation will come into effect this coming April in arrogant disregard for all the many sensibly argued submissions made to the government – like it or not.”

Seb Maley, CEO at contractor insurer Qdos, described the IR35 reform as a “needless, short-sighted” tax grab from the government. 

“Given the alarming threat coronavirus poses to the economy, this is not the time to introduce a reform that has the potential to irreversibly damage the UK’s contractor workforce. But while these reforms are disruptive, complex and unfair, they can be managed. And the reality is they will be enforced in a matter of weeks. Businesses need to be prepared, pragmatic and ready to make well-informed IR35 decisions.”

Dave Chaplin, CEO and founder of ContractorCalculator, described the confirmation of the extension as “exceptionally disappointing”.

“In a recent survey conducted by ContractorCalculator, 12,000+ contractors told us that 52% of firms are losing at least 50% of their contracting workforce. Contractors are abandoning their clients and UK plc is set to suffer irreparable damage. The Conservative Party allegedly supports small business but with the introduction of this toxic tax the government will irreparably damage the self-employed sector.

“Already we are seeing firms unfairly classify self-employed workers as ‘deemed employees’, which means they are taxed as employees, but yet receive none of the rights of employment.

“A much simpler off-payroll tax of circa 5%, without the need for a complex employment status test, is the obvious choice, but this suggestion has fallen on deaf ears once again. Havoc will ensue. Mr Johnson and Mr Sunak will go down as the pair who introduced the ‘no rights employment’ model and damaged the flexible workforce.”

And Matt Fryer, group compliance director at accountants Brookson Group, said while he wasn’t surprised that there were no last minute changes, he was disappointed in the way HMRC has managed the roll-out of these changes and the way that large proportions of private sector organisations have failed to prepare adequately, even with a relatively long lead in period.

“End hirers who fail to manage their new obligations could face serious commercial implications, while those who continue to support genuinely self-employed contractors will benefit significantly from this change. Hirers carrying this new responsibility from 6 April should ensure they have met their reasonable care requirements and have not exposed themselves to commercial risk. These obligations continue post-April 2020 and will be the new business as usual.

“The government have said they will encourage HMRC to take a ‘light touch’ approach for the first few months of these changes, however, only time will tell what the full ramifications and unforeseen consequences of this change will be on the flexible workforce and the broader UK economy.

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