Off-payroll 2019 is impossible

Great news for those concerned about a repeat of the omni-botch that was the rushed roll-out of the off payroll rule changes (aka IR35) in the public sector in April 2017. I’ve had a letter from Mel Stride and he appears to rule out an April 2019 introduction for the private sector.

I saw my MP last month who listened to my concerns about the proposals in the consultation around the private sector. He agreed to try to get me in to see Mr Stride to talk about it face to face. Whether or not this was going to happen, I was very grateful for my MP’s attention and his efforts.

I can’t say I was shocked that Mr Stride couldn’t fit me into his schedule just now – I understand he’s pretty busy – but the reasons in his letter did get me thinking.

The letter mainly includes many of the usual standard paragraphs we’ve seen recently (see some notes below). You’ll recognise them well if you follow the excellent work of Dave Chaplin at contractorcalculator. But in response to my MP’s suggestion Mr Stride meet me, he said:

“As the consultation has closed and the Government is considering how to proceed, it would not be appropriate to meet at this stage”

Consider this alongside the fact that as yet, there has been no response from Government to the Off-Payroll consultation. In addition, in the same letter Mr Stride seems to tie in the employment status consultation, which closed many weeks before the Off-Payroll one, and still has no published response. The Budget will be presented in six working days.

So – if a few days ago, the Government was still considering how to proceed, I find it impossible to imagine that anything around an April 2019 introduction, along with the draft law that would be needed immediately for such a significant change could be included in the Budget (which is presumably already long-finalised).

Introducing the changes in April 2019 would be too soon in any case, but rushing this again, after the experiences that have been shared about the shoddy practices that surrounded similar amendments in the public sector would be foolhardy in the extreme. 

And of course, doing all this at the same time as Brexit (when businesses will have to be ready to amend many business-critical processes at short notice) and Making Tax Digital (which the accounting profession has been talking about for ages, but clients are only just starting to hear about) was always a non-starter. But it’s nice to have it in writing!

Notes on that letter:

Para 3 – non-compliance has not been properly measured, in numbers or in pounds. Requests to show workings have not been answered. Widely circulated ‘extra’ cash of ￡410m has been admitted by HMRC to be a cash flow advantage only – a one-off cash generation – not a real saving at all. This money is extra income tax receipts, but ignores the loss in corporation tax and other taxes which negate most of this headline-grabbing figure.

Para 4 – blanket rulings – the letter says ‘evidence’ shows that this isn’t happening. This ‘evidence’ is purely the widely questioned external review that was conducted after only a few months, and only involved talking to public bodies, asking them if ‘everything was okay now’. It was run by a consultancy that carries out numerous studies for public sector bodies. How independent was it? The study did not talk to ANY contractors, or ANY intermediaries.

Para 5 – the CEST tool. Mr Stride notes my concerns and talks about the development of the tool. At no point in this paragraph does he say the tool works properly or is successful! For example: “Results were tested against known case law and settled cases” – that doesn’t mean it got them right, does it?

Para 6 – the ‘estimated’ cost to tax payers – no backup for this figure (￡1.2bn) has ever been given and it wouldn’t be unreasonable to wonder if it’s a cash flow one-off again. If so, then the following year presumably Government coffers will be down again the best part of a billion pounds. Short-termism of the best kind on show here.

Para 7 – we haven’t responded to the consultation yet and there’s loads of evidence to think about. I say – good, don’t rush it then.

Para 8 – we’re still thinking about what to do so I can’t meet Mr James – good, don’t rush it.

Para 9 – we’re also looking at employment status in another consultation – yes, I know – shouldn’t there be a joined-up approach as all these issues (five separate workforce-related consultations) interact with each other?

Chris James is an IPSE accredited, award-winning Chartered Accountant. He believes taxes are necessary but should be collected based on the law, not based on the interpretation of the person shouting loudest in the room.

He is Head of Accounting Services at JSA Group, which provides accounting, payroll, umbrella and business advisory services to small businesses, contractors and freelancers across the UK.

He is also Chairman of the FCSA, whose compliance-audited members provide the highest standards of professional services to the freelancing and contracting sector.