The controversy surrounding changes the Government will announce in the Autumn Statement continues, as recruiters say forcing clients to determine the IR35 status of contractors would be ‘devastating’ to the professional contracting market.
What do the ‘leaked’ proposals involve?
Industry body, APSCo, has reacted angrily to recent news reports which suggest that the Government is planning to impose new restrictions which may force contractors to undergo an employment status test after working for the same client for as little as one month.
The Government ‘leak’, which was featured in The Mail and The Guardian, suggests that the Chancellor is seeking to close a ‘loophole’, which enables individuals to provide their services through personal limited companies to ‘avoid tax’. The reports suggest that up to £400m could be raised each year from changing the rules.
APSCo says, if the stories are true, and new legislation is forced through, this shows a “wilful disregard for the concerns raised in APSCo’s and other stakeholder responses” to a recent IR35 discussion document. Interested parties had until the end of September to submit their views.
Of course, anyone who has worked in the industry for a while knows that such a proposal is likely to be as unworkable as it is unpopular, but worse still, APSCo says it has grave concerns over suggestions that it will be engagers (i.e. clients) who will be burdened with the task of determining contractors’ employment status.
Employment status tests – HMRC has bad form
This could be via a ‘supervision, direction or control’ test, which, the recruitment organisation feels is “wholly inappropriate in isolation, and will disproportionately impact on highly regulated sectors such as financial services.”
It is worth reminding ourselves that HMRC has previous form when it comes to online testing. In 2012, it released the IR35 business entity tests, which were created to help people establish the likelihood that they would be targeted for an IR35 investigation. In reality, the tests were useless, and were quietly withdrawn earlier this year.
Contractors provide their skills to clients on a short-term business-to-business basis; clients do not have, nor want to have any employer-type responsibilities over them, nor do contractors wish to be treated as employees. This is the essence of contracting, and any attempt to force such obligations onto clients is very controversial.
What happens now?
Contractors are facing more new legislation than ever before (read our four-fold tax attack article for more details), and as a result of this recent speculation, the forthcoming Autumn Statement on November 25th could be a defining moment for the industry.
Written by James Leckie