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HMRC hints at private sector IR35 reform

HMRC hints at private sector IR35 reform

Might the IR35 reform that has negatively impacted the public sector soon be coming to the private sector? Unfortunately, it seems that could be the case.

The minutes from HMRC IR35 forum, which took place in December 2017, have been released. As part of a section around Budget Announcements, HMRC made positive noises about IR35 reform and its effect on the public sector. Their view is that the logical move is to extend this into the private sector moving forward.

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A segment of the minutes reads: “The government reformed the off-payroll working rules (known as IR35) for engagements in the public sector in April 2017. Early indications are that public sector compliance is increasing as a result, and therefore a possible next step would be to extend the reforms to the private sector, to ensure individuals who effectively work as employees are taxed as employees even if they choose to structure their work through a company.”

Seeing this will no doubt infuriate many contractors, as well as the larger self-employed community.

Genuine IR35 reform?

External research was recently commissioned by the government to gauge the impact the reforms have had on the public sector. And while the minutes state that the ‘government take account of the needs of businesses and individuals who would implement any change’, that will do little to appease contractors who feel their way of working has, not for the first time, become an unjustified target of attack for HMRC.

If the reforms do take place, the government would have ignored the objections of organisations such as APSCo and IPSE. They have both been vociferous in their opposition to such a move.

In fact, during the HMRC IR35 forum, a paper on the reforms was handed to the forum members in the public sector compiled by IPSE and APSCo.

This paper included examples of issues arising after the reforms were introduced. This included blanket decision making and concerns about staff shortages in some parts of the public sector.

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The forum did respond to some of the points raised by the paper during the meeting. Many concerns were raised about blanket decisions being made amongst other issues.  HMRC responded by saying it's been working with the public sector and delivering webinars and guidance to help address this. The paper suggested that blanket decisions were likely to come to the private sector if the reforms are introduced. HMRC acknowledged the need to assess the risk of this happening.

The full list of points raised with APSCo and IPSE’s paper can be viewed here.

HMRC also acknowledged some problems with the ESS tool and its ignorance around mutuality of obligation, as covered previously by Larsen Howie. HMRC said it will be issuing a response to the concerns and criticisms around the topic soon.