An IR35 roadmap for 2018 and key issues

28th December 2017
Written by Qdos Contractor

Key issues the Treasury must focus on in 2018

Despite an announcement in the November Budget which suggests that IR35 reform will not be introduced in 2018 as first feared, next year could still prove to be a defining one for changes to tax rules impacting contractors working the private sector.

Rumours surrounding further IR35 changes will ultimately continue until the Government either confirms or completely rules out private sector reform. But until we reach this point, there are a number of key issues the Treasury must focus on in the next twelve months.

 

Approach the 2018 IR35 consultation with an open mind

The Government promised to assess the impact of public sector changes before they explore the possibility of future private sector reform.

If they are to truly examine just how much recent public sector reform impacted the UK’s flexible workforce, they will understand that further changes would be neither wise nor necessary.

That this consultation is simply being used as a way of delaying inevitable IR35 reform (and in-turn a huge backlash from the UK business community) remains a concern.

It’s vital the Government approaches next year’s IR35 consultation objectively and without their mind already made up.

 

Consider the relationship between tax status and employment rights

Through recent tax changes, the Government is gradually taking away the benefits of working self-employed without offering incentives or benefits in return.  

If as a contractor, you are found to be inside IR35, you will be made to pay similar taxes to an employee. Contractors are understandably concerned about being placed inside IR35 not just by public sector clients, but their private sector engagers too.

In the past, professional contractors have been adamant about their wishes to work without any real ties to their clients and were confident they did not need nor want employment rights. You could even argue that to a certain extent it contradicts the premise of independent working.

Whether contractors’ feelings towards employment rights have changed amid ongoing IR35 uncertainty remains to be seen. However, there is no doubt independent workers would prefer to keep the responsibility of setting their own IR35 status.

In the Autumn Budget, the Government announced that in addition to the IR35 consultation it will review complex employment status rules in 2018. But we’ll have to wait and see whether this will extend to an assessment of the relationship between tax status and employment rights.

 

Publish a detailed IR35 roadmap

Should the Government ignore huge pressure not to go ahead with new changes to the IR35 legislation, it must provide a detailed roadmap of how it intends to implement reform in the private sector.

Last April’s reform was rushed through and public sector bodies and agencies were largely unprepared. The private sector is a bigger and more complicated beast altogether, and the Government must ensure it gets the implementation right second time around – if it is intent on extending reform that is.

 

Review the quality of the CEST Tool regardless of plans

In its current state, the effectiveness of HMRC’s CEST Tool leaves a lot to be desired. Regardless of whether further reform is on the agenda (and the general feeling is that it is), the accuracy of the very tool built to assist in the IR35 decision making process must be re-evaluated.

In the public sector, the tool is currently used by clients to make IR35 determinations, and there’s no reason that it wouldn’t one day be used in the private sector too.

IR35 experts simply do not trust the tool to make well-informed status decisions, and with good reason too. The complexity of IR35 makes it incredibly difficult for a piece of flawed technology to give accurate results on a large scale, particularly when used by largely inexperienced decision makers.

 

Ruling out private sector reform entirely

Ruling out private sector changes entirely would be a very smart move, and the one UK business would welcome the most. But unfortunately, this seems unrealistic. Everything suggests that IR35 reform will reach the private sector in time, which is why companies and agencies must begin preparations now.

Regardless of the Government’s future IR35 plans, contractors and the companies which engage them would benefit hugely from honesty and pragmatism when dealing with changes to the off-payroll working rules in 2018 and beyond.

Qdos Contractor
Written by
Qdos Contractor
Award-winning providers of insurance for the self-employed, Qdos are the leading authority on IR35, offering industry-leading employment status services to ensure the flexible working industry thrive. Qdos are the Best Contractor Insurance Provider 2022 and won the Queen’s Award for Enterprise in Innovation 2022 and 2017. 

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