James Poyser, CEO of inniAccounts and founder of instrumental IR35 spotlighting site offpayroll.org.uk, has written an open letter to Chancellor Sajid Javid warning of the negative impact the impending off-payroll rule changes are having on the contracting community.
The letter includes data garnered by submissions to the above site by affected contractors, and a plea to postpone the legislative reform, in hopes of stinting the slew of blanket determinations currently sweeping the private sector.
Letter debunks HMRC claims that IR35 does not affect genuine contractors
Poyser’s 4-page letter aims to debunk the oft-used (but unfortunately empty, for the most part) reassurances from HMRC that genuine contractors will not be affected by the IR35 reform. While it’s true that limited company contractors that are truly self-employed (by the taxman’s definition) won’t have to pay increased income tax, they are being subjected to blanket bans across the financial, pharmaceutical, and tech sectors.
‘Whilst I concur with your goal to ensure that “two individuals working, in the same way, pay the same tax”, I find the perpetuation of this simplistic rhetoric to be counterproductive,’ Poyser writes. ‘The self-employed have become demonised. This, combined with HMRC’s heavy-handed approach to bringing the 30% into compliance, has resulted in large businesses pulling down the shutters on all who are self-employed. This is gravely concerning for both the individuals and their families and our economy.’
‘The 70% complying with the existing rules are feeling an impact. Provisions have been laid down in the proposed legislation to ensure that companies take “reasonable care when [they] make a determination about the employment status of a worker”’, he continues. ‘This should have protected the self-employed, and those complying with existing IR35 rules.’
Poyser letter reveals 69% of contractors subjected to blanket IR35 determinations
The letter shares both quotes and data from findings gathered via Poyser’s illuminating site, demonstrating an undeniable lean towards blanket determinations on the run-up to April 6th.
‘Through the website www.offpayroll.org.uk, this month alone we have feedback from over 900 self-employed individuals who are providing services to over 350 organisations,’ Poyser writes. ‘69% have been told that their client is no longer willing to engage the self-employed, and no status determination will take place.’
These offending organisations don’t just include the prominent corporate organisations - HSBC, Barclays, GSK, and IBM to name a few - that have been widely reported on. Smaller companies have also taken the same approach, following the beaten path of risk-aversion with little consideration for how their businesses will function without a highly-skilled, flexible workforce when the dust settles.
Poyser implores Sajid Javid to consider future of UK labour market post-IR35 reform
We’ve written before about the steady rise in contracting, despite a prolonged period of political uncertainty and extensive legislative change. IPSE's latest study shows that the number of self-employed people in the UK is the highest it's ever been, coming in at just under 5 million and making up around 15% of Britain’s workforce. Those kinds of numbers shouldn’t be trivialised, particularly in the face of a shifting socio-political landscape - i.e. Brexit.
Poyser incorporates this into his letter, wrapping up his appeal to the Chancellor by imploring him to consider the future of the UK’s labour market. He writes:
‘This week, the Prime Minister spoke, in the context of leaving the EU, of needing “a more agile country able to exploit new technologies”. And, Chancellor, you have a large part to play in delivering this vision. I feel you should be leading the charge for businesses large and small to work hard to assert our new position outside the EU, and ensure we are prepared to capitalise on the opportunities this will present. Consider IT alone: 93% of CIOs cited the ability to develop software as a key to respond to leaving the EU, with the nation facing a scale of change that is simply “unprecedented”.’
You can read the open letter in full here.
What can businesses do to prepare for IR35 without blanketing?
The most important thing to remember when preparing for IR35 is that transparency is key. Maintain good communication during the whole process and encourage openness throughout the supply chain to minimise the potential for any nasty surprises, all while cultivating trusting business relationships.
“The hallmark of businesses approaching IR35 correctly is excellent communication,” states Poyser. “As long as the end client has shown willing and kept the process transparent, contractors are generally happy regardless of the outcome. The businesses most successfully tackling IR35 are also providing extra information surrounding the off-payroll rules and offering reassurance to the contractors they work with.”
“It’s always highly disappointing to see large end-clients opting to take the ‘easy route’ when dealing with IR35, rather than working with contractors to determine a truthful position on a contractor’s IR35 status – whether inside of IR35, or outside,” adds Matt Tyler, Larsen Howie’s IR35 Consultancy Manager. “The message that needs to be conveyed here is that it is entirely possible for contractors to continue operating outside of IR35 after the 6th April 2020. End clients should not simply knee-jerk contractors inside of IR35 as this will doubtless damage their reputation with contractors.”
There are many routes that businesses can take to proactively prepare for the IR35 reform. This includes, but certainly isn't limited to, identifying the number of workers who currently operate via a PSC or limited company, determining if IR35 applies to any contracts and working practices that extend past April 2020 and assessing arrangements involving complex labour supply chains.
How Larsen Howie can help you prepare for IR35
There are steps you can take, no matter where you sit on the supply chain, to make sure you’re ready for the changes; contract and working practices reviews are the first port of call while educating yourself about what the off-payroll rules mean for you is crucial to staying on the right side of the legislation.
Larsen Howie offers a range of contract and working practices reviews – you can find out which option would be best for you here. We also offerIR35 investigation insurance with representation from Andy Vessey, should it go to tribunal.
For any further information or advice, please call us on 01163 800 400 or drop us an email. Alternatively, take a look around our Knowledge Hub for more IR35 advice, industry news and contractor guides.