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Will HMRC extend IR35 off-payroll regulations to private sector?

15 Nov 2017

Background: April 2017 saw HMRC introduce new legislation that meant the client would be responsible for checking a contractors IR35 status in the public sector, requiring the deduction of tax and national insurance contributions from contractors’ pay at source. Click here to read more.

When the new IR35 off-payroll regulations were being developed, there was much speculation as to whether HMRC would extend the change in legislation to the private sector. Now the financial secretary to the Treasury has confirmed that the department is considering extending the off-payroll rules to the private sector.

A focus on collecting taxes from all workers

HMRC’s treasury secretary told the Financial Times “It is not just the issue of tax that we might not be collecting that we should be collecting, it is also an issue of fairness between the public and private sector.” He went on to say that the government wouldn’t be unduly deterred by opposition from private sector employers and that since the reforms were enacted an additional 90,000 workers are now being taxed as employees.

If the Treasury extend IR35 off-payroll reforms into the private sector it would remove the current disparity between the public and private sectors. But is this a good thing?

Contractors could be forced into permanent employment

As a member of ASPCo (The Association of Professional Staffing Companies) First Recruitment Group follow developments very closely, and our representative at the association believes there is “no doubt” an extension of the regulations into the private sector will have a significant impact on the dynamics of the labour market for flexible workers.

Project focused clients could suffer

One of the key elements of this off-payroll legislation is that it shifts the responsibility for making IR35 decisions from contractor to client. That is why we feel it is important to inform our clients and contractors of these potential changes now. This will particularly affect clients who need a flexible, scaleable workforce, relying heavily on the contractor workforce.

Our hope is that HMRC aren’t so short-sighted to consider the long-term implications for businesses in an already turbulent economy, and consult properly to come up with a workable solution.

When we find out more information we will continue to keep you updated.

Source: Financial Times article https://www.ft.com/content/fc02936c-bb1b-11e7-9bfb-4a9c83ffa852

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