UK industry calls for delay of IR35 off-payroll tax rules to private sector
Early responses from government consultation not happy with off taxman's plans
Industry bodies are urging the British government to delay its plans to extend much-hated anti-avoidance tax law IR35 to the private sector, according to an analysis of responses to a government consultation by ContractorCalculator.
In the autumn statement of 2018, UK.gov proposed extending the legislation to the private sector next year. It aims to close loopholes that allow people working through personal service companies to avoid tax contributions, which the government says will cost some £1.3bn by 2023-24.
However, in April, MPs warned the UK government to pay close attention to the effect IR35 tax reforms will have on the private sector, with the reforms having led to contractors leaving public sector projects.
According to the consultation responses, which closed on 28 May 2019, respondents were unanimous in calling for a further delay to allow the private sector adequate time to prepare for the changes. They said the April 2020 rollout doesn't allow businesses adequate time to prepare.
The feedback analysed by ContractorCalculator consists of 29 consultation responses from the likes of the Institute of Chartered Accountants in England and Wales (ICAEW), the Confederation of British Industry (CBI), the Recruitment and Employment Confederation (REC) and the Association of Independent Professionals and the Self Employed (IPSE).
Some noted that firms typically require 12 months to implement new IT systems and associated processes in response to such changes, and that they are only likely to do so once changes have been legislated. Given that legislation isn't finalised until November of each year, the earliest feasible date for private sector implementation is April 2021.
HMRC's Check Employment Status for Tax (CEST) once again came under fire. It was launched as voluntary online tool in 2017 to help assess whether workers were classed as IR35.
"We consider that relying on the CEST tool, as it currently stands, cannot be justified under law, based on a variety of issues that have not been resolved yet," said Ernst & Young (EY).
Dave Chaplin, CEO and founder of ContractorCalculator, said: "Our summary makes it clear that HMRC has a lot of work to do before it can seriously consider extending the Off-Payroll rules to the private sector. Many have urged HMRC to take stock, instead of ploughing ahead with its ill-conceived plans.
"At the very least, a further delay until April 2021 is needed to enable HMRC to attempt to fix the many flaws in its plans – it is time to delay, review and rethink."
According to the response from Qdos Contractor: "To implement further reform now, when the effects of Brexit cannot be fully realised, would be a grave lack of judgment and could have disastrous consequences."
An HMRC spokesperson said: "Following consultation the government announced that it will extend the reform of the off-payroll working rules to all medium and large organisations from April 2020.
"The government listened to the concerns of individuals and businesses and delayed extension of the reformed rules until then to ensure they have time to prepare." ®