Our Message on IR35 is Clear – Don’t Rush Ahead with Changes

The IR35 consultation deadline is fast approaching and our message to government is clear: to proceed with rushed reforms to IR35 in April 2019 would create upheaval in the private sector and risks damaging the flexibility of the labour market. The changes to IR35 in the public sector have created new and difficult problems which need to be tackled. Since IR35 was introduced in 2000 we have stressed that a long-term approach to tax and employment status is needed rather than tweaks to IR35 as this inevitably leads to more issues. We are calling on the government to undertake a comprehensive post-implementation review of the public sector changes and an impact assessment for the private sector so that these issues are fully captured. We are also highlighting the sectoral challenges our members have flagged.

Government needs to consider sectoral impact

The REC is in a unique position with members operating in industries across the economy to gain an insight into the sectoral challenges associated with IR35. We’ve heard from members supplying candidates in energy, media, logistics and engineering who are particularly reliant on freelancers and fear rushed changes could have a detrimental impact on their ability to provide candidates for key projects. While the basic principles of any reform to IR35 needs to remain the same across the board, the government needs to take account of the varying business models that exist across the economy and ensure businesses have sufficient time and resources to adapt.

Knowledge in the private sector of IR35 is low 

Members are also concerned about the level of understanding of the proposed changes to IR35 among clients across all sectors. The private sector is hugely diverse ranging from micro-businesses to large multi-nationals. Some will have access to legal or tax advice but many small businesses will not. A comprehensive awareness raising campaign is needed ahead of any changes to ensure that businesses have the knowledge and capability to be compliant with any new legislation.

Feed into our survey

There’s still time to complete our survey and share your views on the government’s proposal around IR35. The more responses we get the stronger our evidence base will be.

Next steps

After weeks of engagement with members, HMRC and the Treasury and other stakeholders we’ll be submitting our consultation response on 10 August. However, our campaign on IR35 will continue into the Autumn as the government gears up for the Budget. If you have any questions about our work in this area please email policy@rec.uk.com

Edited 02 August 2018 to add "The changes to IR35 in the public sector have created new and difficult problems which need to be tackled. Since IR35 was introduced in 2000 we have stressed that a long-term approach to tax and employment status is needed rather than tweaks to IR35 as this inevitably leads to more issues."