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Industry reps told the UK taxman everything wrong with extending IR35. What happened next will astound you

Don't like it? Take it to an employment tribunal!

The UK government disregarded a raft of concerns about extending IR35 to the private sector in its response to a consultation over off-payroll working rules, industry groups have said.

Last week the Treasury published draft legislation intended to extend controversial IR35 changes to the private sector, which will make companies and recruitment agencies liable for ensuring contractors are not doing similar jobs to that of payroll employees.

The measure is expected to bring in £3.1bn in additional revenues for the Exchequer between 2020 and 2024.

During its consultation on the changes, the government received over 200 written responses on its plans to extend the reforms first introduced to the public sector in 2017. But a number of groups have said a list of their concerns has been largely ignored.

Out of 19 key themes raised in the consultations, former IT consultant and founder of ContractorCalculator Dave Chaplin said HMRC and The Treasury ignored the vast majority. These include calls to delay the reform, establishing an independent appeal process and concerns over the adequacy of its online status checker - Check Employment Status for Tax (CEST).


Chaplin noted repeated concerns have been raised about the fact HMRC will be classifying people in employment law as employees, but not giving them any of the associated benefits.

"HMRC has estimated that 170,000 contractors will be affected, and claims that 90 per cent of them will have their income dropped.

"That's over 150,000 individuals who are about to face up to a 20 per cent pay cut overnight in the next nine months. For many, that's the cost of their current mortgage."

In its summary of the consultation, the government acknowledged many expressed the view that its CEST tool "did not accurately reflect current case law, used language which was overly complex, and was ambiguous about how it reached its decisions.

"Many of these respondents suggested that CEST required an overhaul to meet the requirements of the varied set of working relationships that will be in-scope of the off-payroll working reform from April 2020."

In response to these issues, it said: "HMRC has been working to better understand the needs of organisations and to enhance the service. Enhancements will be tested with stakeholders and rolled out ahead of the reforms being introduced."

Chaplin said the tool is unlikely to be revamped until March 2020, which will not give organisations and contractors enough time to assess the status before the reforms come in the following month.

Rather than create an independent appeals process to challenge rulings, HMRC said: "Those who wish to challenge their employment status for rights can take their case to an employment tribunal, regardless of their tax status."


No reference was made to the calls for a delay to the reforms until 2021 to give businesses more time.

Mark Beal-Preston, chief commercial officer at professional services company Optionis Group, said: "We're disappointed to see that many of the key concerns raised by the contractor community have been overlooked with this draft legislation.

"It now appears unlikely that there will be a shift in the policy or plans to implement these reforms in April 2020, and the big question for the industry is will businesses be ready in time to implement these changes without unintended consequences?"

Seb Maley, chief executive of tax insurance provider Qdos Contractor, added: "Overall, we are disappointed by the government's response to the IR35 consultation, albeit unsurprised.

"More than anything, HMRC's approach to IR35 reform highlights how important it is that private sector firms get to work immediately in preparing for these changes without relying too much on HMRC for help."

An HMRC spokesperson said: "The government listened to views from stakeholders put forward during consultation and announced at Budget 2018 that the reform will only apply from April 2020 to give organisations time to prepare. In April 2019 HMRC published guidance on the steps businesses and other organisations could take to prepare for implementation.

"In the response to the government's most recent consultation, the design of the reform and the obligations on different parties was confirmed. HMRC will also begin its roll out of education and support packages over summer 2019 and will launch the enhancement of the CEST service well ahead of April 2020." ®


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