Following changes to public sector IR35 legislation in April this year, recent government statements have suggested that the new rules may be extended to the private sector.
With the autumn budget now just a week away, the government’s financial secretary to the Treasury Mel Stride recently told the Financial Times newspaper that his department was considering reforms in this area, commenting that it was not just the issue of tax, but “an issue of fairness between the public and private sector”.
However, recent research by the Association of Professional Staffing Companies (APSCo) found that 45% of professional recruitment consultancies have witnessed the costs of resourcing contractors within the public sector increasing since the new rules were introduced in April this year. Of these, 46% reported that rate rises were in excess of 15%. Furthermore, 78% of respondents agreed that the extension of the IR35 Off-Payroll rules to the private sector will impact the ability of the UK economy to source flexible labour.
In light of this information, Samantha Hurley, director of operations at APSCo, said:
“We have long assumed that HMRC is continuing to consider an extension of the Off-Payroll rules into the private sector. However, like our members, we believe that this will have an adverse impact on the strength of the UK’s labour market and wider economy … There is no doubt that such changes will have a significant impact on the dynamics of the UK flexible labour market, and cause damage to client organisations and contractors at a point when Brexit and EU negotiations are critical for UK business and jobs confidence. Flexibility is key to the competitiveness and the future growth of our economy.”
“Self-employed contractors are a vital resource to the UK economy and to undermine this sector would cause significant damage at a point of uncertainty and instability. The Government is trying to compare ‘apples with pears’. A self-employed contractor does not have guaranteed continuity of work or benefits associated with ‘employee status’, such as sick pay, and so it is inappropriate to tax them in the same way.”
A statement from Julia Kermode, chief executive of The Freelancer & Contractor Services Association (FCSA), echoed the importance of not disrupting the flexible labour market, warning that such a change would be even more expensive and complex to administer in the private sector. She said:
“Simply put, if the Government makes it too difficult or too expensive for businesses to access the workforce and talent they need within the UK, then why should they do business here? The timing of rolling out these new reforms into the private sector is wrong and will put our economy at further unnecessary risk.
“If the Government is committed to rolling out IR35 changes into the private sector at the very least I would hope to see a proper post-implementation review of this year’s IR35 changes and the impact they have had on the public sector before any decisions are made. Work patterns are changing and we are seeing a growth in non-traditional employment that is going to continue.”