HR · 21 May 2018

Government consultation on off-payroll working rules is based on flawed assumptions, CEO says

The government released its consultation on off-payroll working rules in the private sector on 18 May 2018. However, the document spells bad news for the flexible economy, Chris Bryce, CEO of the Association of Independent Professionals and the Self-Employed (IPSE), has said.

Off-payroll working rules were created in 2000 to prevent contractors in the public sector from avoiding taxes. It was found that individuals working through an intermediary, such as a personal service company, were paying less in national insurance contributions than they would as a direct employee.

Some abused this system by resigning and then returning to their previous job role as a contractor with more favourable tax rates.

The issue was addressed in the public sector, with the government placing responsibility on the company to determine the status of the employee. Depending on feedback, the government will look to extend the rules – also known as IR35 – to the private sector.

The consultation hopes to see how those involved in the process would address any compliance challenges. It will be open until 10 August 2018.

Bryce deems it a fatal blow to the UK’s flexible economy. He said: “For the government to even consider introducing the ill-judged changes to IR35 in the public sector to the private sector before their full impact can be truly analysed is outrageous.”

IPSE’s own research paints a different picture to the statistics cited in the consultation document, suggesting large numbers of contractors are walking away from the public sector, with a particularly bad effect on the NHS.

“It is shameful that the government did not publish the external research into the impacts of the public sector changes prior to announcing this consultation,” Bryce added. “Undermining confidence in our flexible, self-employed workforce is the last thing the government should be doing at this time of great uncertainty over Brexit.”

April 2018 saw the IPSE release a report maintaining that freelancers thought Brexit would negatively impact business. Some 81% of respondents expect costs to keep increasing until Britain formally leaves the EU.

“The consultation itself is based on flawed assumptions,” Bryce opined. “The government is kidding itself if it thinks HMRC’s online tool – which it encourages people to use to determine their IR35 status – can be relied upon.”

Bryce is referring to the case where an IT contractor argued in court that HMRC had incorrectly determined that he was caught by IR35. If IR35 is so complex that not even HMRC can accurately determine who it applies to, Bryce said, then how can the government expect anyone else to? After all, HMRC has resources and expertise not readily available everywhere.

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Shané Schutte is the deputy editor of Real Business, with a particular specialism in employment and business law, human resources, information technology and sales/marketing.