Some of you may well have signed up to this petition, that is asking for “Repeal IR35 legislation in Public Sector and proposed Private Sector rollout.
You will note that there has been very little of any consequence modified from the previously published draft issued earlier this year.
It therefore contains a number of unacceptably difficult elements, assuming that we have to suffer the regulations at all. These include:
- A client-led arbitration process should you disagree with the (client’s) original findings on the assignment designation of inside or outside IR35.
- No recognition that freelancers (and especially interims) take financial risk by being in work on their own account and therefore cannot be ‘fairly’ treated in the same way as employees when it comes to employment taxes raised at source (when being paid by client or provider).
- Interims have no desire to accrue employment rights (see 2!)
- The Treasury and HMRC continue to peddle the notion that large amounts of tax have gone ‘missing’. The statement at best is a stretch of the full and whole view of the situation which has not been properly calculated.
- The view that the process is working well in the public sector is another ‘stretch’ at best. There is plenty of anecdotal evidence, often with supportable statements, that strongly suggest otherwise in terms of delay or problems occurring in major project implementations with highly qualified staff choosing to leave their assignments in protest.
- There is no mention in the reply of the government’s not-fit-for-purpose CEST (Check Employment Status for Tax) tool which is supposed to be undergoing an extensive re-write to more accurately reflect the real working situation for any assignment.
- The government claims to have listened regarding application of the rules to small businesses (note: there is nothing equivalent in the public sector); and, as a result, have removed an estimated 1.5 million small businesses from scope. A more cynical view is that they are just too hard to police, so why waste the energy?
Enough signatures have now been obtained to require a formal response from the government and this has been received by all signatories today. For your information, this is reproduced in its entirety below:
Dear Tony Evans,
The Government has responded to the petition you signed – “Repeal IR35 legislation in Public Sector and proposed Private Sector rollout.”.
The off-payroll working rules do not apply to the self-employed. They ensure that individuals who work like employees but through their own company pay broadly the same taxes as the directly employed.
The off-payroll working rules have been in place for nearly 20 years. They are designed to ensure that individuals working like employees, but through their own limited company, pay broadly the same tax and National Insurance contributions (NICs) as those who are employed directly. The rules support a fair tax system by ensuring that two individuals working in a similar way for the same employer pay broadly the same tax and NICs, even if one of them structures their work through a company.
The rules apply only to individuals who are working like employees through their own company and do not apply to the self-employed.
Non-compliance with these rules is widespread. HMRC estimate that only 10% of those who should be applying the rules do so. People who are not complying with these rules are not paying their fair share of employment taxes resulting in projected costs to the Exchequer of £1.3 billion a year by 2023/24. This money would otherwise go into funding hospitals, schools and other public services.
To address this, in April 2017 the Government reformed the way in which the rules operate in the public sector. Public sector bodies are now responsible for determining whether the rules apply to individuals they contract with through limited companies, and for ensuring that they and the individuals who work for them pay the right tax. HMRC analysis of income tax and NICs receipts shows this has been successful in improving compliance, with an estimated additional £550 million being raised over the first 12 months. Independent research has also shown that this change has so far been achieved without disrupting public services or reducing market flexibility.
Though the rules are now operating effectively in the public sector, non-compliance is growing elsewhere. That is why at Autumn Budget 2018 the Government announced that it would extend the reform to all medium and large organisations from April 2020.
The Government has consulted extensively on the proposed extension of the reform to other sectors, and on 11 July published its response to the most recent consultation: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/816059/Off-payroll_working_rules_from_Apri__2020_-_summary_of_responses.pdf.
Having listened to stakeholders, the Government decided not to apply the reform to the smallest 1.5 million organisations. It will take effect from April 2020 to give organisations time to prepare. The Government has also decided to bring forward legislation requiring organisations to maintain a client-led status disagreement process to allow individuals and fee-payers to challenge the client’s status determinations directly and in real time.
The Government is currently seeking feedback from experts and stakeholders on the draft legislation for inclusion in Finance Bill 2019.
Falling within the off-payroll working tax rules does not change an individual’s status for employment rights as there are currently separate frameworks for tax and for employment rights, with no direct link between them. However, as set out in the Good Work Plan published in December 2018, the Government agrees that reducing the differences between the tax and rights frameworks for employment status to a minimum is important. In the meantime, it is right that the Government takes action to improve compliance with existing tax rules. Those who wish to challenge their employment status for rights can take their case to an employment tribunal, regardless of their tax status.
The Government values the contribution of flexible workers to the UK economy. However, it is also under an obligation to ensure fairness between individuals who work in a similar way.
Click this link to view the response online:
The Petitions Committee will take a look at this petition and its response. They can press the government for action and gather evidence. If this petition reaches 100,000 signatures, the Committee will consider it for a debate.
The Committee is made up of 11 MPs, from political parties in government and in opposition. It is entirely independent of the Government. Find out more about the Committee: https://petition.parliament.uk/help#petitions-committee