‘Off-payroll’ rules for private sector delayed, but still protested
IR35 rules governing ‘off-payroll’ working will now be extended to the private sector from April 2020, the chancellor announced in his budget, which will affect businesses in how they pay contractors and freelance workers.
The IR35 regime was introduced to the public sector in 2017 and has meant employers are responsible for deciding whether to deduct tax and national insurance (NI) from workers, as well as making employer national insurance contributions.
Philip Hammond has now extended the rules to private sector workers. He said the move would be restricted to medium-sized and large businesses, but no immediate guidance was offered on exactly which organisations would be affected.
The announcement has been met with mixed response, however.
Association of Independent Professionals and the Self Employment reacted angrily, commenting that the “smash-and-grab approach to taxing the smallest businesses is short-termism on steroids. It is a short-term tax grab that will do lasting damage to the economy by taxing out of existence the smallest and most agile businesses.
“These are the very businesses the government and large corporations will need to call upon to provide the specialist skills to navigate our way through Brexit. The Chancellor’s budget record is stuck on repeat: go for the self-employed, go for the self-employed.
“The off-payroll rules are so complex and crude that genuinely self-employed people will be swept up by the government’s smash-and-grab mentality and in many cases taxed out of operation.”
Meanwhile, specialist contractor insurance service provider Qdos Contractor, says the government should take a look at themselves first.
“HMRC should improve their own efficiencies, make use of the powers already afforded to them, and follow their own code of conduct in protecting taxpayers’ rights, in order to achieve improved compliance – not apply a broad stroke and further complicate the tax system for genuine contractors and those who engage them, whilst still enabling end users to continue enjoying the flexibility that accompanies contract work with none of the responsibilities of an employer.
“In addition to a critical assessment of public sector reform, we encouraged HMRC to at the very least, delay reform until such time as employment rights and tax are aligned, affording contractors the protection they should be entitled to.”
Recruitment and Employment Confederation Chief Executive Neil Carberry was, however, more positive about the news. He said:
“Businesses across the country will welcome the generally pro-enterprise tone taken by the Chancellor this afternoon. Today’s cut in small business rates, the delay IR35 taxation changes for private sector contractors and further changes in how the Apprenticeship Levy works are all positive steps.
“The REC asked the Chancellor not to implement changes in taxation for private sector contractors in 2019. We’re glad he listened. This is a big win for businesses, allowing industry to maintain access to skills and expertise at short notice. But today’s delay must now be used as an opportunity to get any future reform right, not just a delay.
“Recruitment professionals have said the implementation of IR35 in the public sector have not gone as planned – and has fueled tax avoidance by the unscrupulous, so now is a good time to pause for thought.”