Two New Year's resolutions - part two

It seems like a long time before Off-Payroll in the private sector will be introduced, in April 2020. But in fact, it’s not – it will be here in no time. What should contractors and freelancers be doing now, to keep themselves on the straight and narrow, thinking about their current situation, and the future?

Hopefully you enjoyed reading about employment status Hokey Cokey in the first of this two part series. It recommended that if you’re not sure about your status, you need to get sure, and soon, and find out what your supply chain is likely to think about that. So, what’s the other one?

Resolution number two

Off-payroll and IR35 has ignited much debate and many passions in the last three years. It’s the first issue I ever ‘published’ anything on, and there are a lot of people talking about it – at least that’s how it looks. But there’s a huge risk we’re all talking to each other, in our little industry bubble. So please, get outside your comfort zone, and on this issue:

Get informed about the off-payroll changes, and help with the campaigning

I think, to be honest, a lot of people just don’t think it will make any difference if they do something or not. But that’s wrong. If everyone thinks that, and does nothing, then law-makers will be able to pass law unmonitored and unchallenged. Consider the following:

Government is having trouble passing legislation. This will mean that they have to limit the amount of controversial stuff that they put forward. Off-payroll is controversial. It’s right that we all help shine as much light as possible on changes that could be so counter-productive.

MPs don’t know much of the detail of this kind of legislation. Unless they have specific responsibility for it, they just haven’t got time to know about every single bit of law. If you go and talk to them about it, there’s a good chance you’ll leave them better informed.

Someone else won’t do it – I went to see my MP. He listened very carefully and more correspondence followed – but most importantly, no one else had contacted him about the issue, let alone met him on it. So don’t assume your actions aren’t important.

There are real questions to answer on Off-payroll. Government agrees with this – so they’re consulting again. Why doesn’t liability more easily pass to the end user? Why is there no meaningful appeals process for contractors? Why didn’t the first external review talk to any contractors – and shouldn’t we have a second review that does?

Why is the CEST tool endorsed when Government have acknowledged it needs improving? What about end-users who quietly allow the Er’s NIC charge on the new rules to dribble down to the contractor? Why does HMRC continue to say that the public sector roll-out went really rather well, when those of us who work with contractors heard numerous, very different accounts from the coal face?

The original changes were brought in with insufficient implementation time, a huge lack of preparation (the CEST tool, then ESI arrived a matter of days before the rules changed – people needed it six months earlier for contract and rate negotiation), and a massive black hole where information should have been to help the supply chain cope with the changes. It was left to people like me to go out and plead with contractors not to use offshore schemes and other high net pay arrangements. Next time, it needs to be done a lot better.

HMRC do need scrutiny – look at the recent Lords report into the loan charge. It is right that those who collect tax do so fairly and honestly. There is disquiet about the apparent retrospective nature of this change, and the feeling that there’s been some re-writing of history. Since IR35 and off-payroll could also trigger similar debates, I don’t think it’s in anyone’s interest to ignore this issue.

I’m personally not in the camp that says that everything HMRC does is wrong – that’s just an attempt to use overly simplistic binary logic to turn the issue into an argument. But I do think on this issue, and others, there’s a real case to answer. 

So, what can any of us do about it?

Get informed – but check your sources

First, watch out for commentators making it up as they go along. IR35, Off-payroll and employment status is hard, and some people unwittingly spread myths and legends around our sector because they’ve got used to hearing them. I’m getting tired of reading that IR35 is coming to the private sector in 2020. Where do people think it is now?

Take this article from This Is Money, headed Almost 1 in 5 firms paid NOTHING last year – about corporation tax – but without the necessary detail to establish if this is wrong or right. If I run a company, and pay my staff (and perhaps myself) so much that I make no profit, I’ll pay no corporation tax, but have sent a fortune to HMRC in PAYE and NIC. Does that make me a scrooge? Over-simplifying helps no one, so make sure you are getting good information while you’re mulling this over.

Get campaigning

So then if you feel inspired by what you discover, you should seriously consider campaigning. Once these changes go through, especially if without proper scrutiny, you may find yourself caught up in a mess you should not have had to worry about. So make a fuss – see your MP, find out what else you can do, share your story. 

Ready for your second new year’s resolution? Then get over to www.contractorcalculator.co.uk for unrivalled campaign info, www.ipse.co.uk for a huge range of relevant information, and of course www.fcsa.org.uk has a range of insight and data as well as commentary and a directory of accredited members. All three of these organisations have different agendas, but all are united in wanting to challenge the off-payroll changes – both in the public sector and those scheduled for the private sector. 

So - make 2019 the year you do challenge the status quo, before it’s too late.

Chris James is an IPSE accredited, award-winning Chartered Accountant. 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. He writes on LinkedIn in a personal capacity.