The REC has been told that the forthcoming review into IR35 will not consider changes to legislation. The confirmation came directly from HMRC by email which made clear that the review will be limited to how IR35 will be implemented.
This means despite loud and consistent arguments from across the industry and wider employment world, to delay the legislation IR35 will be rolled out to the private sector on 6 April. Final legislation is to be expected in the spring budget on 11 March giving businesses just weeks to make necessary reforms to complex payroll systems. Int appears that the proposed review will consist of six roundtable discussions at HMRC’s London offices within the coming weeks.
“We know from experience that the proposed IR35 legislation, as it stands, will have unwanted consequences,” says Tom Hadley, director of policy and campaigns at the Recruitment and Employment Confederation. “Everyone should pay the correct tax. But these reforms would provide the perfect environment for unregulated and non-compliant umbrella companies to thrive at a cost to ethical businesses and workers who want to play by the rules. This can only be bad for workers, and undermines what IR35 sets out to achieve.
“So it is disappointing that the review won’t be looking into the legislation itself, as we had hoped, and will limit engagement from outside of London. This makes delaying implementation, and the need to regulate umbrella bodies, even more urgent. Businesses may have just weeks to make sweeping reforms to their payroll at what is already an extraordinarily difficult time as Brexit uncertainty and skills shortages take their toll on employer confidence. Getting IR35 right and learning from the lessons of the past is critical.”
Below are some of the top reasons the REC think the government should review IR35 for workers, recruiters and employers:
1. Rushed, last minute legislation is hard to implement properly, and it is vital to get good legislation and compliance right from the outset.
2. Delaying until 2021 would enable the government to assess the effect of the legislation including a full impact assessment of the IR35 public sector changes.
3. Businesses’ awareness of the changes is low, and the government gave assurances in 2018 that companies would have time to implement the final legislation. It now looks like the legislation won’t be finalised until March 2020, which leaves only a few weeks for firms to get to grips with any final changes before implementation.
4. Implementation in 2021 would also allow the recruitment industry to deal with the four legislative changes which will come into effect this April as a result of the Good Work Plan – Key Information Document, repeal of Swedish Derogation clauses, written statement and holiday pay changes. As well as Brexit.
5. A delay would allow the government to regulate umbrella companies, something which it has long promised. Without this regulation we risk non-compliant umbrellas prospering, facilitated by IR35 changes. This would be bad for workers and runs counter to the government’s Good Work Plan.