Top recruitment agencies campaign for IR35 reform delay despite the unlikelihood
A number of leading recruitment organisations have penned a joint letter to the Chancellor in which they urge the Government to delay incoming reforms to the Off-payroll working rules.
The letter, which the likes of The REC, Hays, Harvey Nash, Reed and ten other recruitment organisations have all signed, recommends that Sajid Javid should “pause and think again” with regards to April’s IR35 changes.
Despite recently launching the IR35 review, the Government has made it clear that it intends to press on and roll out changes to the legislation on 6th April. The review details alone suggest this, explaining that the consultation has been opened to ensure the “smooth implementation” of reform.
Recruiters, contractors and private sector firms are concerned about the changes, which will see medium and large businesses handed the task of assessing the IR35 status of contractors they engage.
Agencies find themselves caught up in the reform, with fee-paying recruiters set to carry the IR35 liability – in other words, the risk – for assessments made by the businesses they place contractors in.
But the fact that recruiters could be punished for incorrect assessments made by the end-client isn’t the only reason the industry is calling for a last-minute delay.
As The REC’s CEO, Neil Carberry, explained, the “timing” and “structure” of the IR35 review and concerns around regulating umbrella companies means that “delaying will allow MPs to properly take stock of the impact the legislation will have.”
The letter sent to the Chancellor is measured. It agrees that it is “vital that people pay the right amount of tax, and that the system is fair.” It then goes on to state that this is exactly why the Government must rethink reform, which risks the “poorer treatment of contractors and compliant companies losing out to those who bend the rules.”
The fourteen organisations that wrote this letter say the recruitment industry is well-placed to offer the Government advice, given that agencies “place a million people into temporary and contract work” every day. As experts on the world of work, the letter explains that IR35 reform needs a “far more extensive rethink.”
“Learn lessons” from the Loan Charge
Reference is made to the introduction of the Loan Charge last year, which continues to impact tens of thousands of contractors – many of whom bought into disguised remuneration schemes on the premise that they were compliant. The Chancellor has been advised to “learn lessons” from implementing “badly designed changes” and apply the Loan Charge learnings to IR35 reform in the private sector.
Delay reform until 2021
While not supportive of any roll-out of reform in any respect, the letter calls for a 12-month delay, which would give all impacted parties reasonable time to prepare. It makes the point that the “current timetable leaves 17 working days between the publication of the final legislation on March 11th and implementation on 6th April.”
The letter, which you can read in full here, concludes by suggesting two key takeaways for the Government to consider…
Adopt an “independent Chair”
The Government should not introduce IR35 changes until an independent review of reform has been held. The letter stresses the importance of appointing an “independent Chair” that sits outside of HMRC, which would mean the review would be “legitimate” and “win business confidence.”
Take onboard public sector experience
Before private sector reform is rolled out, a thorough assessment of public sector changes must take place. The letter states that an accurate review of the public sector changes cannot be held until a “full tax compliance cycle” has concluded, which will happen this month.
Blanket and risk-averse IR35 decisions are also alluded to, with the letter stating: “There is much evidence which shows there are ongoing issues with the public sector reform. These problems need to be fixed before any changes can be implemented in the private sector.”
While continued lobbying against the changes is absolutely worthwhile, it remains to be seen how much notice the Government will take. With this in mind, it’s vital recruitment agencies are ready for the likely arrival of IR35 reform on 6th April.
With over 25 years’ experience, Qdos specialises in IR35 compliance. We conduct, on average, over 2000 IR35 status reviews every month and have handled more than 1,600 IR35 enquiries. We are currently working with over 100 agencies and end-clients, helping them manage reform to the IR35 legislation.