Contractors – A Lack of Faith?
Not for the first time, contractors impacted by IR35 outline a lack of faith in HMRC
With further IR35 reform on the horizon, contractors have made it clear to the newly appointed Prime Minister, Boris Johnson, that they do not believe HMRC has any idea about the potential negative implications of further changes to the legislation.
You might already be aware that from 6th April 2020, the Government will introduce further reform to the IR35 rules, which will see the medium and large private sector companies engaging contractors becoming responsible for determining the tax status of these individuals. As part of these changes, the IR35 liability will also shift from the worker to the fee-payer in the supply chain.
Given similar changes have been in place in the public sector since 2017 and resulted in many contractors being placed inside IR35 unfairly by their clients, independent workers have voiced their concerns, with 85% of more than 1200 stating to QAccounting and Contractor Weekly that the tax office does not know what it’s doing.
Emphasising contractors’ lack of trust in HMRC, just 9% are confident the taxman understands the risks involved with extending IR35 changes to the private sector, with 6% unsure.
But should we be so surprised that contractors feel this way? Perhaps not. HMRC’s heavy-handed approach to IR35 compliance in recent years has left independent workers with next to no confidence in the Government’s ability to grasp the impact of reform.
Add into the equation that HMRC is insistent that public sector changes have been a success despite the fact thousands of contractors have been subject to non-compliant blanket IR35 determinations, and it’s hardly shocking that most independent professionals have strong views on the subject.
You could argue that the Government’s unfair treatment of contractors in recent years has led a telling 91% of independent workers surveyed to state they do not think politicians appreciate the contractor workforce as a tool for economic growth. Only 1% think their economic contribution is valued, with 8% not sure either way.
Following the recent arrival of Boris Johnson as Prime Minister in partnership with the apparently business-savvy Sajid Javid as Chancellor of the Exchequer, it’s important insight such as this is taken seriously by the Government.
With Mr Johnson intent on delivering Brexit by 29th October, many IR35 specialists have advised the new administration that it must think long and hard about the level of support it offers the independent workforce. QAccounting partner, Qdos, along with the trade association, IPSE, are two of a number of IR35 experts that have stressed the importance of this to the new Prime Minister.
With the entire self-employed sector valued at £275bn according to IPSE, looking ahead to what are unquestionably testing times for Mr Johnson, this figure suggests it would be in the Government’s best interests to consider the possible implications of IR35 reform if mismanaged.
As contractors, recruitment agencies and private sector engagers prepare for next year’s changes, our latest survey statistics send a clear message to the Prime Minister and his Cabinet: HMRC must take a considered approach when implementing IR35 reform and policing compliance at what is a vital time for the independent workforce and the UK.