A ‘factsheet’ has been published by Contractor Calculator with statistics to suggest IR35 reform has not been a success, despite the Government’s best efforts to convince UK business otherwise.
The document details recent changes to off-payroll working before setting out a structured argument against each one of HMRC’s claims that reform is improving IR35 compliance overall.
At a glance, here’s how the ‘factsheet’ refutes the Government’s reform rhetoric.
There are a number of factors which make it - at this stage in time - impossible to tell whether IR35 changes have earned the Government this additional sum in income tax and NICs.
Increased revenues from income tax must be measured against corporation tax and dividend tax, and these figures will not be calculated until January 2019 tax returns. In addition to this, the rising costs of hiring contractors in the public sector (which has reached 15% in some cases) must also be considered.
Following reform, blanket IR35 determinations are commonplace, despite changes being enforced well over a year ago. FCSA data suggests just 24% of public sector organisations carry out proper IR35 assessments, while IHPA research has shown 60% of NHS locums are subject to blanket decisions.
70% of recruiters surveyed by APSCo revealed public sector contract placements have dropped as a result of changes. Research from recruitment agency, Harvey Nash, supports this, showing 49% of contractors now only take on private sector projects. The IFF study, commissioned by Government even alludes to this, detailing the struggle that 32% of central bodies now have when filling temporary vacancies.
71% of public sector projects suffered, were delayed or even cancelled altogether in the immediate chaos following IR35 reform. In particular, National Rail, HS2 and The NHS have all experienced difficulties, while TfL put a three month project delay down to a shortage of contractors.
Given the Government’s IR35 tool assumes MOO (Mutuality of Obligation) exists in every contract - something HMRC themselves admit - CEST is not aligned with case law.
Barristers and other IR35 experts have also expressed concerns over the tool’s reliability, while it was recently revealed HMRC cannot prove its accuracy.
Evidence suggests otherwise. The Times recently broke the news that, following changes to IR35, recruitment agencies have encouraged contractors to work through non-compliant ‘umbrella’ tax schemes. It’s also estimated that around one in ten payroll companies are being investigated by HMRC for non-compliance.
This IR35 ‘factsheet’ should give the Government serious food for thought. It strengthens the widely-held view that public sector reform has failed, which could play an important part in discussions regarding private sector changes, which the Government are currently consulting on.
For more information on the consultation and how to contribute click here.
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