A major industry body has voiced its reaction to the recent Finance Bill, and in particular the government’s publication of a draft legislation on off payroll arrangements in the public sector.
This legislation reveals that public sector ‘end-users’ – better known as clients – will be responsible for determining whether IR35 rules apply to contracting professionals.
The Association of Professional Staffing Companies (APSCo) has reacted to latest developments through a series of comments by the organisation’s general consul, Tania Bowers.
Bowers was pleased to see that APSCo’s advice around lobbying had been taken by the government.
“While the draft legislation is pretty much as we expected in that it removes contractors from the scope of IR35 and makes this new legislation applicable instead, we are pleased that HMRC has, at least, taken on board APSCo’s lobbying arguments for a statutory obligation on the public sector client to make the determination to decide whether, if the worker was engaged directly s/he would be an employee for tax purposes, and that this information must notified to the intermediary,” she said.
Bowers said this decision was vital, as a recruiter looking to start the process would need to know how much they can pay the worker, as well as what models can be used.
Despite this, Bowers criticised HMRC with regards to the time frame given to provide the required information.
“What the draft legislation does say is that the recruitment firm can request the determination if it is not received – and that the public sector client must provide it within 31 days,” Bowers explains. “The recruitment firm can also raise queries on the decision but again the public sector client has 31 days to respond. The draft legislation does not pass the liability for the determination on to the public sector client unless they simply fail to provide the information after a request. The draft wording is in no way ideal but it does at least confirm the important underlying principle that the public sector client is the only party that can determine the status of an assignment.”
Bowers went on to express her and APSCo’s belief that the vast majority of intermediaries ‘will treat workers as deemed employees in order to mitigate risk and while contractors will be able to query decisions’, which will ‘inevitably lead to investigations dragging on which is far from ideal’.
APSCo also clarified its belief that the requirement for a chain payment for a worker’s services within the draft legislation could mean that consultancies providing outsourced services, rather than a provision of a worker’s services, could be outside of the scope of the legislation. This would be good news for contractors that may be involved in some of the larger infrastructure projects announced in the sector.
Bowers did culminate her statement on a somewhat more sombre note however.
“However, the overall picture is a gloomy one,” she said. “The UK’s ability to prosper in a post Brexit world rests on our capability to source highly skilled experts – often on a short-term contract – and on a just in time basis. Whether these independent specialists will still be available once the new rules are in place – and what impact this will have on our economy remains to be seen.”