November Budget - Stop Public sector IR35 rules coming into the Private sector

[bobspud]

I haven't sent the below to my MP yet so any advice on where I have made errors or phrased things badly would be appreciated.

Cheers


I’m writing in regard to the rumoured extension of the off-payroll rules to the private sector. I contacted you last year prior to these changes being introduced to the Public Sector. I and many others predicated that the introduction of the rules in such a haphazard way would prove disastrous for the Public Sector and it turns out we were right. HMRC have presented a version of events that deems the introduction of these rules as a ‘success’. I’d like to see what their criteria for ‘success’ is but I can guarantee it is not the same measure that any reasonable business would use. There have been delays in numerous critical Public Sector Projects (TFL etc.) due to the application of these rules and the Public Sector has found it extremely difficult to hire the talent they need and are having to increase rates to secure it. I wonder has anyone in Government factored the increase in costs to Public Sector Bodies against any perceived increase in tax take?

Contractors have also left Public Sector Bodies in droves due to blanket assessments that everyone working through a PSC was ‘inside’ IR35 even though this goes against the HMRC guidelines that reasonable care be given to each determination. However it has since been discovered that HMRC have been advising Public Sector bodies in a way that encouraged blanket determinations. This has resulted in a legal challenge by Locums, the first of many one would assume!

Most organisations and Public Bodies take a low risk approach to legislation that could potentially result in penalties. As IR35 is a complex piece of legislation (with many grey areas) it is unreasonable to expect businesses to assess the working conditions of each and every contractor working for them with the expertise required to make an accurate determination. To help with this issue HMRC have introduced CEST, a tool that was late in its release and one that has gone through many updates and revisions since. CEST is somehow supposed to reduce years of case law to a number of straightforward questions that will result in an accurate determination of status. Unfortunately the tool is what HMRC want it to be (something that classes the vast majority of people inside IR35) rather than a fair and unbiased assessment of existing case law. They have even left out one of the key tests ‘Mutuality of Obligation’ from the tool and they claim to have done this intentionally! No court in the country would accept a CEST tool determination as an accurate assessment of IR35 status but Public Sector bodies are informed that this is the only result HMRC will accept when trying to assess status. In what universe is this ‘fair’? How have we got to a point where the tail is wagging the dog? Do Government just follow HMRC’s instruction even though it contradicts the laws of the land and has a direct negative impact on businesses both small and large in this country?

Disguised employment is a problem and most contractors recognise this. However this does not justify the approach being considered as a solution as there will be negative outcomes for the vast majority of contractors and the businesses that use them. The upheaval and uncertainty that extending the off-payroll rules will cause will have a direct negative impact on an already fragile economy and it will drive many self-employed people away from the Conservative Party. Most self-employed people do not want to vote for Labour or Corbyn but they are being forced in that direction by a Conservative Government who seem intent on penalising small businesses in every budget and have also created wider economic uncertainty with Brexit. This is confusing given the Governments tenuous grip on power… why attack your own voter base?

The increased Tax that HMRC hope to gain does not justify the wider problems that this legislation will create. There are plenty of sensible and business friendly measures that can be implemented to help tackle disguised employment. The Taylor report needs to be implemented in a structured way over an extended period of time that will give businesses the time and space to adapt.

It is not fair to force an individual to pay tax in the same way as an employee but at the same time deny them access to any of the associated rights. Contractors have no entitlement to Holiday Pay, Sick Pay, Severance and their contracts can terminated on a day’s notice. Contractors take risks and perform a vital role in the economy. Having a flexible labour force creates an environment where businesses are encouraged to invest without having the burden of having to employ additional permanent staff. To try and compare a permanent employee on PAYE to a contractor who has no rights is not fair. The government’s position that people doing similar work should pay the same taxes because it’s an issue of fairness is disingenuous in the extreme. For the analysis to focus only on activities carried out is to ignore the many vital differences that justify a different tax approach.

Please do not underestimate the strength of feeling in the Contracting community over these changes. I think the extension of these rules to the Private sector will weaken the government at one of the most crucial periods in recent history.

Can I suggest you start by removing fair or any referral to it. The answer to that point is to give you more employee rights and thats not what we want.

What we need to do, is show them that the changes won't just be absorbed and as a result big businesses will find that they are getting 30% higher bills for the same person just because you have to pay more taxes.

Point to the fact that the businesses won't pay that so it will probably end in your company being driven out of business and into liquidation.

If you have had any recent bench time then you need to point out how much money you needed to tide you over and how you would not be able to store that money if IR35 applies vs using your business to support you.

Basic stuff really. But none of it is about being fair.

[TheFaQQer]

If your MP is a Conservative, then I would also highlight how they are meant to be the party of business but yet again this is another attack on the smallest businesses who contribute billions to the economy every year.

If your MP is a Conservative then I would also highlight the things that Hammond said in opposition about IR35, eg "One reason why the Government’s IR35 initiative has been so damaging and destructive is the fact that it has hit at the most flexible part of the economy" (2001 Westminster Hall debate)

I'd focus on the impact on your business as well - you're priced at the top of the market, businesses will not pay freelancers more than the rate you charge, you will close down / retire / emigrate etc

[TheCyclingProgrammer]

Never understood the problem of being a contractor with a client for a number of years. I know many companies that have long standing relationships with client, suppliers etc. Obviously, if they act like an employee then that's different but not sure why the number of years has anything to do with it.

There isn't inherently wrong with it.

There is something wrong with a "contractor" who has been working for years for the same client, bum firmly on seat, treated like any other employee, part and parcel of the organisation and is for all intents and purposes a disguised employee. The longer you work for a client (on-site especially) the risk of you becoming one of those contractors arguably increases.

That doesn't mean of course you can't have long-term B2B relationships with a client - in fact establishing good long term clients is a good thing for business!

TLDR; IMO genuinely disguised employees are probably more likely to stick around with a client for longer, but it's probably a one-way correlation - length of relationship in itself is no real indicator of anything.

[SueEllen]

I haven't sent the below to my MP yet so any advice on where I have made errors or phrased things badly would be appreciated.

Cheers


I’m writing in regard to the rumoured extension of the off-payroll rules to the private sector. I contacted you last year prior to these changes being introduced to the Public Sector. I and many others predicated that the introduction of the rules in such a haphazard way would prove disastrous for the Public Sector and it turns out we were right. HMRC have presented a version of events that deems the introduction of these rules as a ‘success’. I’d like to see what their criteria for ‘success’ is but I can guarantee it is not the same measure that any reasonable business would use. There have been delays in numerous critical Public Sector Projects (TFL etc.) due to the application of these rules and the Public Sector has found it extremely difficult to hire the talent they need and are having to increase rates to secure it. I wonder has anyone in Government factored the increase in costs to Public Sector Bodies against any perceived increase in tax take?

Contractors have also left Public Sector Bodies in droves due to blanket assessments that everyone working through a PSC was ‘inside’ IR35 even though this goes against the HMRC guidelines that reasonable care be given to each determination. However it has since been discovered that HMRC have been advising Public Sector bodies in a way that encouraged blanket determinations. This has resulted in a legal challenge by Locums, the first of many one would assume!

Most organisations and Public Bodies take a low risk approach to legislation that could potentially result in penalties. As IR35 is a complex piece of legislation (with many grey areas) it is unreasonable to expect businesses to assess the working conditions of each and every contractor working for them with the expertise required to make an accurate determination. To help with this issue HMRC have introduced CEST, a tool that was late in its release and one that has gone through many updates and revisions since. CEST is somehow supposed to reduce years of case law to a number of straightforward questions that will result in an accurate determination of status. Unfortunately the tool is what HMRC want it to be (something that classes the vast majority of people inside IR35) rather than a fair and unbiased assessment of existing case law. They have even left out one of the key tests ‘Mutuality of Obligation’ from the tool and they claim to have done this intentionally! No court in the country would accept a CEST tool determination as an accurate assessment of IR35 status but Public Sector bodies are informed that this is the only result HMRC will accept when trying to assess status. In what universe is this ‘fair’? How have we got to a point where the tail is wagging the dog? Do Government just follow HMRC’s instruction even though it contradicts the laws of the land and has a direct negative impact on businesses both small and large in this country?

Disguised employment is a problem and most contractors recognise this. However this does not justify the approach being considered as a solution as there will be negative outcomes for the vast majority of contractors and the businesses that use them. The upheaval and uncertainty that extending the off-payroll rules will cause will have a direct negative impact on an already fragile economy and it will drive many self-employed people away from the Conservative Party. Most self-employed people do not want to vote for Labour or Corbyn but they are being forced in that direction by a Conservative Government who seem intent on penalising small businesses in every budget and have also created wider economic uncertainty with Brexit. This is confusing given the Governments tenuous grip on power… why attack your own voter base?

The increased Tax that HMRC hope to gain does not justify the wider problems that this legislation will create. There are plenty of sensible and business friendly measures that can be implemented to help tackle disguised employment. The Taylor report needs to be implemented in a structured way over an extended period of time that will give businesses the time and space to adapt.

It is not fair to force an individual to pay tax in the same way as an employee but at the same time deny them access to any of the associated rights. Contractors have no entitlement to Holiday Pay, Sick Pay, Severance and their contracts can terminated on a day’s notice. Contractors take risks and perform a vital role in the economy. Having a flexible labour force creates an environment where businesses are encouraged to invest without having the burden of having to employ additional permanent staff. To try and compare a permanent employee on PAYE to a contractor who has no rights is not fair. The government’s position that people doing similar work should pay the same taxes because it’s an issue of fairness is disingenuous in the extreme. For the analysis to focus only on activities carried out is to ignore the many vital differences that justify a different tax approach.

Please do not underestimate the strength of feeling in the Contracting community over these changes. I think the extension of these rules to the Private sector will weaken the government at one of the most crucial periods in recent history.

Personalized your letter - write about the impact of all the changes on your individual business don't talk in general.

So if you have done public sector work explain how the regulations have changed what work you have taken on and why.

Then say how the changes will influence what you do in your business e.g. retire, refuse to commute, whatever.

[ChimpMaster]

There isn't inherently wrong with it.

There is something wrong with a "contractor" who has been working for years for the same client, bum firmly on seat, treated like any other employee, part and parcel of the organisation and is for all intents and purposes a disguised employee. The longer you work for a client (on-site especially) the risk of you becoming one of those contractors arguably increases.

That doesn't mean of course you can't have long-term B2B relationships with a client - in fact establishing good long term clients is a good thing for business!

TLDR; IMO genuinely disguised employees are probably more likely to stick around with a client for longer, but it's probably a one-way correlation - length of relationship in itself is no real indicator of anything.

Highlighted in bold, to emphasize that this could be the same for any duration, whether it's 6 months or 6 years. Over a longer period of time, I agree the risk is greater, but only if the contractor or the client allow the relationship to slip into something that more resembles an employee/employer one.

[jamesbrown]

Sounds like a done deal.

https://www.ft.com/content/48adc7d0-...1-794ce08b24dc

(If you're not a subscriber, Google "Budget to signal focus on private sector’s bogus self-employed").

[AtW]

It was always a question of when, not if.

I guess they won't be reducing dividend taxes either

[eek]

Sounds like a done deal.

https://www.ft.com/content/48adc7d0-...1-794ce08b24dc

(If you're not a subscriber, Google "Budget to signal focus on private sector’s bogus self-employed").

Let’s be honest, the Taylor report made it too good an opportunity to ignore. Interestingly the article speaks of long lead time so it’s exactly as I first suspected announced now for April 2019.

[cmscotland]

The FT article though does say that the chancellor has decided against rushing it, sounds like some sort of consultation might be announced rather than an implementation date. A little surprised to see that it's "only" £1.2 billion that they think they're losing out on from "disguised employment" surely there's easier ways to get that figure (Amazon, Starbucks, Vodafone, etc).....

[jamesbrown]

The FT article though does say that the chancellor has decided against rushing it, sounds like some sort of consultation might be announced rather than an implementation date. A little surprised to see that it's "only" £1.2 billion that they think they're losing out on from "disguised employment" surely there's easier ways to get that figure (Amazon, Starbucks, Vodafone, etc).....

I thought it was a little ambiguous on that. I couldn’t tell whether the second paragraph was talking about the private sector rollout or additional rules in the PS (in terms of not rushing). I assume it’s the former, in which case a consultation, followed by implementation in 2019, does seem to be what they’re alluding to.