“Extending off payroll rules to private sector is only one option”

The FCSA event I attended on Friday was probably a lot more useful than I imagined it would be. Firstly HMRC actually attended and what’s more surprising was that the two representatives appeared to actually be well informed and clued up!

Our blog post here (https://www.crispcontractor.co.uk/blog/what-could-be-next-for-ir35-in-the-private-sector/) covers most of the points discussed but there are a few points that need delving into a little deeper.

The HMRC team dealing with IR35 are also responsible for any changes that come out of the Taylor review. The Taylor report has already been delayed and we are unsure when to expect this now. HMRC gave the impression that they wouldn’t delay the IR35 consultation for the Taylor review.

HMRC were keen to stress that extending off-payroll rules to the private sector is only one option and they want to hear others. I am very skeptical to the fact that they will actually consider any other options. They are choosing to go straight to consultation rather than issue a discussion paper listing the key issues, which implies they see only one realistic solution….

Surprisingly, they were happy to confirm that nothing would be introduced by April 2018. Although I was already expecting April 2019 to be the earliest date for any changes it was nice to hear this directly from the horse's mouth.

Once again the biggest issue I have with HMRC’s view is the “evidence”. They made a point early on in the presentation to say that any action will be considered carefully and evidence-based - the problem is their evidence is very questionable to say the least. Firstly, they still are unable to tell us how this ￡1.2bn of non-compliance is made up, I doubt they ever will.

Perhaps even more questionable is the 91,000 extra “employments” in the public sector as a result of improved compliance. They were quick to emphasise that this did not mean 91,000 people, their excuse for this fact was that many people had multiple employments in public sector at any one time…. Even if you assume this 91K employments equated to 60K people (I think it is probably a lot higher than that) this would be well over double the number of people HMRC estimated this would impact over a whole year, these results were just the first quarter! How many people have therefore deemed to be an employee unfairly!

How does their original ￡1.2bn figure still hold up if they have caught more than double the number of people already that they had estimated? There are far too many holes in their numbers and questions that need to be answered.

When IR35 was first introduced in 2000 it was originally set to be the end client who made the IR35 determination, much like it is now in the public sector. This was changed to the contractor to self-determine at the last minute, mainly as a result of lobbying against MP’s in a week government fearful of the upcoming election. Weak government, weak economy, Brexit? These factors mean it isn’t completely beyond the realms of possibility to see a push back here, particularly if blue chips stress the impact of an extra 20-30% on their wage costs - let's see!

It’s now time to put all this out of our mind, enjoy Christmas and pick it back up in January when they publish the results of the independent research.

Luke Desmond is founder & CEO of the Crisp Business Group, an expert in contractor accounting and business growth. Crisp Contractor are specialist online accountants providing contractors, freelancers & locums with accountancy, umbrella & payroll services. Crisp Accountancy provide accountancy & advisory services helping small businesses grow and achieve their goals.