REC Blog

IR35 consultation released today
IR35 consultation released today
Regulation 18th May 2018

The government has released its consultation on off-payroll working in the private sector. It has been published alongside research undertaken by IFF Research into the impact of the public sector reforms which were introduced in April 2017. Whilst we continue to analyse this research and the consultation itself, here is a summary of the key points from the consultation.

The consultation focuses on how compliance with the off-payroll rules can be improved. We support the government’s efforts to improve compliance and ensure that everyone pays the right amount of tax but are concerned that the government wants to proceed with reforms which are not fit for purpose. It is telling that even in the government’s own research 51% of central government bodies reported that they did not think that the public sector reforms were easy to comply with. HMRC were able to walk public sector bodies through the reforms in the public sector and still there were significant difficulties. They will not be in the position to do this with the millions of businesses and contractors in the private sector. That’s why it is essential that the government proceeds cautiously and over a reasonable time period.

The consultation puts forward three options:

  • Extending the public sector reform to the private sector;
  • Encouraging or requiring businesses to secure their labour supply chains
  • Additional reporting requirements.

The government has asked for alternative ideas for improving compliance but has ruled out many of the ideas put forward already such as IPSE’s freelancer limited company proposal, a withholding tax or employers having to pay national insurance for contractors. We would have welcomed a more open approach to this consultation rather than this narrow focus.

The consultation and research reference the role of recruitment businesses. We and our members who supply to the public sector would have liked to have had an opportunity to feed into this research which unfortunately comes across as one-sided. We will be engaging directly with HMRC on the points raised.

We are pleased to see the government acknowledge ‘that many public authorities would have preferred more time to prepare and adapt to such a significant reform’ in reference to the public sector changes. However, it is unclear from the consultation what the government’s proposed timeline for the introduction of any reform is. We will continue to call on the government to not repeat this mistake and ensure that there is sufficient time for implementation. The lessons from the public sector experience must be learned.

This consultation is a good opportunity to rectify the issues with IR35 in the public sector such as the lack of an appeals process and the CEST tool. We look forward to gathering views from members and contributing to this process. We will continue to stress in our ongoing engagement with the Treasury and HMRC that introducing changes to IR35 in the private sector in 2019 would be premature. The government needs to make improvements to the system in the public sector and plan effectively for any changes to the private sector. We do not want to see a repeat of the public sector chaos.

We’ll be continuing to work with business bodies like the CBI and those on the IR35 Forum to stress the need for a well-planned and evidence-based approach. 

We will be publishing a further blog next week on this consultation and will continue our engagement with members. We need members to share their experiences and concerns as this will strengthen our case.  If you would like to feed into this, please get in touch. The consultation closes on 10 August.

Karen O'Reilly is the REC's Stakeholder Engagement Manager

Karen O’Reilly works with the policy team to represent the interests and concerns of  members to policymakers and stakeholders in a number of sectors including executive search, interim management, financial and legal services, HR and office support. She also works on cross-sectoral issues including employment tax and social mobility and inclusion policy. Prior to joining the REC, Karen worked at the British Chambers of Commerce.  

View More articles by Karen O'Reilly >

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