Though many contractors will have been pleased to see the changes made to the IR35 legislations last week as part of the Finance Bill, a number of concerns do still remain.
These have been highlighted in a new letter from the Association of Recruitment Consultancies (ARC) to MPs, which outlines what the organisation describes as ‘some of the most important anomalies in HMRC’s approach’, and calls for a delay in the changes’ implementation at least until the forthcoming Taylor Report is issued.
Commenting on the bill, Adrian Marlowe, chairman of the ARC said: “The legislation takes an entirely new and worrying approach to contractor and payroll tax and creates a whole series of difficulties. We think it right and proper for these issues to be drawn to the attention of MPs who are now being asked to consider the Finance Bill.”
Marlowe said that the Finance Bill goes beyond simply addressing tax avoidance, and introduces a series of measures that ‘not only break established principles of tax responsibility but also increase the values of tax and NICs’. This, he says, sets an unhealthy precedent for self-employed businesses, which would include personal services companies.
“Apart from the lack of proper transitional provisions for existing contracts, the core underlying issue is the continued use of the old fashioned IR35 test as the starting point,” he said. “Surely that baby is now too big for the pram? Its continued use leads to all the conflicts that arise, the need for the much criticised online tool, and the various damaging impacts that do not appear to have been properly thought through. We believe the new approach needs a thorough review so that it does not slip in under MPs’ radar.”
ARC has called for a total overhaul in the government’s approach to IR35, saying the existing approach is ‘fragmented and ‘based on tax avoidance´ - something the ARC and many contractors feel to be fallacious and flawed.
“We believe that there should be a joined up approach that leads to better conditions for business in the UK, particularly important post Brexit,” Marlowe said.
The forthcoming Taylor Report, which is expected later this year, is examining modern working practices on behalf of the government.
Marlowe added: “It would make sense to await the outcome of the Matthew Taylor and HOC Select Committee reports into employment status and corresponding taxation expected later this year before accepting a new business tax regime now that effectively jumps the gun. We hope that MPs will see the rationale and will bring about a delay in implementation.”