HMRC hint IR35 will hit private sector

HMRC has dropped strong hints that IR35 changes could soon be rolled out to the private sector, despite being slammed as a ‘failed’ reform.

The news will put private sector recruiters on high alert, having witnessed the disdain with which their public-sector hiring colleagues treated the tax law changes.

At the time, recruiters and contractors called the changes ‘chaotic’ and ‘open to misinterpretation’. Many feared an exodus of contractors from the public-sector roles they were placing them in.

Yet, it is increasingly likely, despite strong condemnation from recruiters, recruitment trade bodies and contractors, that in the Government’s next budget, IR35 changes will be extended.

Both The Times and The Financial Times are running stories that claims the Government is considering enlarging its fight against ‘bogus self-employment’ in efforts to crack down on tax avoidance.

Cast your minds back to before April, and there are similarities between the words used in this article and the words used before IR35 rules were changed in the public sector. Earlier this year, HMRC claimed tax law needed to evolve to stymie a £400million black hole in the treasury coffers.

In an interview with the FT, Mel Stride, Financial Secretary to the Treasury, said that there was an issue of fairness between the way public sector and private sector contractors were taxed.

These, by the way, are changes the Treasury implemented themselves – thus tilting the public sector-private sector playing field they now appear to be so interested in levelling.

Chancellor Philip Hammond is also reported as planning to ‘raid’ freelancers and contractors – workers who set up as public limited companies.

However, a recent forum meeting on IR35 found that the tool used to determine whether a contractor falls inside or outside the tax law changes, isn’t working all of the time.

Seb Maley, CEO, Qdos Contractor, shared his concerns with Recruitment Grapevine: “HMRC were slow to announce public sector IR35 reform, causing chaos for contractors, recruitment agencies and the public sector itself.

“If they have plans to extend reform to the private sector – which these minutes hint at – they have a responsibility to end the ambiguity and give contractors and agencies suitable time to prepare.”

Recently, Recruitment Grapevine covered IR35 from its inception to implementation. You can read more about the IR35 journey, in this month’s cover feature, here.

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