One aspect of the recent budget announcement generally applauded by the contractor community was the news that HMRC would be conducting a consultation on IR35 in the private sector.
This week, the Recruitment and Employment Confederation (REC) has provided an update following recent talks with HMRC. Following those talks it has shed light on how the government will approach this matter.
One thing that is pleasing is that it seems HMRC is more willing to look at all the factors around IR35 in the private sector, and less likely to make the knee-jerk decisions that have proved costly in the public sector.
HMRC joined REC at its engineering and technology sector meeting, with REC also attending HMRC’s IR35 stakeholder forum. REC has released a series of updates on the state of play following these meetings.
“HMRC were keen to stress that this consultation is looking at compliance with IR35 in the private sector in its broadest sense,” read an REC statement. “Extending the public sector rules to the private sector will be considered as part of this. But it will be a wide ranging consultation. Spurred on by reports that non-compliance with IR35 in the private sector will cost the exchequer £1.2 billion by 2021/22. This is a considerable jump from previous estimates. We have pressed HMRC and the Treasury to provide further details on the model they are using for this.”
A time of release for the consultation has not been finalised. However, it looks unlikely to come before the end of the year. REC has stressed that those affected will need time to adapt to any changes.
HMRC has also commissioned independent research on the impact of the IR35 changes in the public sector. They believe this will help aid its decision for the private sector.
“This research is focused on public sector bodies only,” REC clarified. “Contractors and representative bodies have not been consulted. We are concerned that this will not provide an accurate picture of the impact of the reforms. HMRC have said that they will ensure that the scope of their research is made clear when it is published in the New Year. This research project makes it all the more important for us to gather evidence from our industry on the impact of the changes.”
The contractor community at large therefore waits for HMRC consultation on the private sector. REC has stressed it will continue to work with HMRC and the treasury. It's aims with both to ‘highlight how important it is that the consultation process is meaningful and reforms are considered carefully.’
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