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IR35 U-turn garners criticism from recruitment bodies

  • Publish Date: Posted about 2 months ago
  • Author: Rebekah Lee
A lot can happen in a month. Not only is the deliverer of last month’s ‘Mini Budget’ no longer in office, but his successor, new Chancellor Jeremy Hunt, has turned almost all the long list of taxation proposals unveiled on 23rd September on their head, in a move designed to inject some stability into the markets’ perceptions of UK PLC.

Whilst the reverse of the Employer’s NIC/Healthcare Levy continues (legislation having started its course), for the recruitment sector, it is one particular policy – IR35 (off-payroll) legislation – that has been a rollercoaster of delight and deflation over the past few weeks. The announcement in the Mini Budget that the 2017 and 2021 reforms to IR35 would be repealed was welcomed by employers, contractors and recruiters alike. It brought new hope that we could strip out the added layers of cost, complexity and compliance involved in hiring contractors. However, the press conference on 17th October and the Chancellor’s subsequent address to the House of Commons has confirmed that the IR35 reforms will now remain in place.

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Although the former Chancellor, Kwasi Kwarteng recognised that IR35 rules ‘added unnecessary complexity and cost for many businesses’, Jeremy Hunt forecasts that keeping the reforms in place will cut the cost of the government’s Growth Plan by £2bn a year as part of a suite of policy reversals worth approximately £32bn a year.

The numbers may add up for the Exchequer and the OBR, but the response from the recruitment sector and employers has been universally critical of the new Chancellor’s move.

Neil Carberry, CEO of the Recruitment and Employment Confederation (REC) pointed out that “Just as scrapping changes on IR35 did not solve the problem of a complex and poorly enforced system, keeping them will not make these issues go away either.” Highlighting the need for policy-making to reflect and consult the real concerns of employers, he added; “We have had too many employment-related policy decisions drafted from the headline down, it is time to start working from the workplace up, in partnership with employers and employees.”

The Association of Professional Staffing Companies (APSCo) has also warned that the U-turn could be damaging and has expressed the anger of the organisation’s members.

Tania Bowers, APSCo’s Global Public Policy Director commented:

The Chancellor’s emergency statement has only served to add to the woes of the UK’s labour market.

Every business across the UK has faced significant upheaval in the last two weeks where time and investment has quite frankly been wasted in addressing the initial plans and the subsequent market fall out of the former Chancellor’s announcement.

The Off Payroll repeal arguably had no impact on the market fall we saw since the Mini Budget which demonstrates that the Government has simply reversed everything from the initial announcement that it could in what we feel is a panicked response to economic troubles.

As the country continues to face significant struggles, having access to a flexible labour market is crucial. Our view that this regulation is not fit for purpose for the modern flexible workforce needs of today remains and we will continue our efforts to address this issue with Government bodies once again.

The Freelancer and Contractor Services Association (FCSA) is equally disappointed by the U-turn on IR35. Chris Bryce, FCSA’s Chief Executive, said,

“This will add to the confusion in the contractor marketplace and will also do nothing to improve the agility and flexibility contractors offer UK plc.”

Here at Morson, the work we have been doing with clients and contractors for several years, following the changes in March 2017 and in preparation for the changes introduced last April, enable us to provide valuable advice to client and contractor communities alike as a key part of our service. We will continue to provide support to people strategies, promoting exemplary governance and compliance requirements. However, we share disappointment that the mooted repeal of IR35 reforms will no longer go ahead, and it is to be hoped that the government might yet, at some point, realise the legislation could and should be reviewed and repealed or improved, though this now seems some years away at best.

Ged Mason, Group CEO of Morson Group commented:

“Despite the amount of work and investment put in over the past couple of years, we welcomed the Government’s announcement last month that IR35 reforms would be scrapped.

“This U-turn is a step back from where we were last week, but we are now back where we were a month ago. The focus now must remain on sharing our knowledge and understanding to help our clients, contractors and candidates find the right solution, while continuing to lobby for an approach that supports a flexible workforce, with the skills employers need, without the added costs of compliance and workforces due to tax implications.”