IR35 Consultation, the story so far

by | Sep 12, 2016 | Uncategorised

The Freelancer & Contractor Services Association (FCSA), of which JSA is a member, recently submitted their official response to HMRC on their proposals to move the responsibility for assessing deemed employment status to the organisation paying a worker – if those workers are doing work for the Public Sector.

For the purpose of this (still being written) legislation, the Public Sector includes government departments, public bodies, the NHS, police, fire and council workers, educational establishments including universities, and other specific organisations such as the BBC, Channel 4, and the Bank of England.

The FCSA made clear that they believe the proposals are going to cause real problems for the workers affected. Firstly, it will be very difficult if not impossible for the placing Agency to correctly complete the assessment in all cases, with or without the online tool HMRC is developing. This is because the Agency, let us not forget, specialises in the business of placing staff, not assessing employment status or defining end-user working practices.

Also, as working practices are relevant to deemed employment status, it may often be difficult to establish these at the beginning of an assignment. The end user would be better placed to provide information on this area, and the FCSA recommend that this is mandated. The end user –the public sector body – is already used to applying additional processes to the use of outside staff resource (PPN 08/15 requires additional verification for such workers at present).

In addition, as these rules will apply only to the public sector in April 2017, some distortion of the workforce is inevitable. At a time when the country is working hard to avoid a downturn after Brexit (with a mix of encouraging and concerning data and surveys emerging daily), it seems a particularly bad time to agitate a flexible bank of human resource with new procedures, requirements and delays – when a similar role in the private sector continues as it does today.

Finally the legislation requires the Agency or other paying intermediary to make deductions from payments to the affected workers’ companies in accordance with payroll calculations, and deemed employment deductions.

The Agencies in many cases don’t currently have this capacity, and the calculation is not straightforward, requiring as it does (to be calculated properly) cumulative information, and adjustments in respect of pension payments which an Agency will find hard to collect and verify. The worker will then have to re-run these calculations inside their own company, and (with the help of an advisor) amend and submit new calculations. This is, if nothing else, highly inefficient and prone to error. April 2017 seems an ambitious target for the reforms.

We also note again here that at the heart of this issue is the deeming and taxing of workers as employees, without giving them employment rights. We would like to see this recognised and dealt with, along with more action, and more publicity on the closing down of large scale steamrolling of groups of workers onto schemes that don’t seem to serve much of a purpose other than to enrich providers. With RTI, the Agency reporting requirements and the data tools that HMRC can surely engage, this shouldn’t be a distant objective.

The very existence of IR35 is often described by HMRC as protecting tax revenue, and the closure of such schemes would enhance this protection, and the rights of the most vulnerable workers, at the same time.

We will keep you as up to date as possible as the reforms are finalised.

JSA Group

Specialist outsourced accountancy and payroll services for recruitment agencies, freelancers, contractors and umbrella workers. We’ve built up expert knowledge and experience within the industry by supporting tens of thousands of customers for 30 years.

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