Contractors, recruiters, and everyone else associated with the so-called “gig economy” appeared to breath a collective sigh of relief yesterday when it was announced at budget that reform of IR35 in the private sector would not be introduced in April 2019 as originally expected, but would instead be delayed by a year and introduced in April 2020. Further comfort was found in the fact that it was also announced that the future reform would not be wholesale across the private sector, but would instead only focus on those engagements where services are being supplied to medium and large- sized businesses. Exactly what is meant by medium and large is unclear at this stage, but several different measures could be used in this regard and government indicates that it will draw on those contained in the Companies Act 2006. By focusing only on medium and larger organisations, it is estimated that only about 5% of businesses within the private sector will need to apply the reform, though of course this is likely to bring substantially more than 5% of PSC’s in the private sector in-scope of the reform due to the relatively large volume of off-payroll resource that such organisations utilise.
This delay and “watering down” of the reform comes off the back of numerous campaigns by contracting bodies such as The FCSA that have fought tirelessly over recent months to point out the conceptual flaws and practical problems with the roll-out of the previous reforms introduced in the public sector (in April 2017). These efforts have been further bolstered by a recent spate of high profile losses for HMRC in the courts where judges have essentially overturned IR35 decisions reached by HMRC’s new digital tool (CEST).
In our opinion there is certainly non-compliance to IR35 across both the public and private sectors (although this is probably overstated by HMRC), but the roll-out of the public sector reform has been clumsy and just plain wrong on certain points of law. This delay to the roll-out of reform in the private sector gives all parties concerned a bit of breathing space in order to properly assess the successes and failures of the public sector roll-out, and to learn from it before introducing reform in the private sector.
Liberty Bishop will continue to offer fully compliant employment, accountancy, and back office support services to contractors and the recruitment sector, and will be fully involved in the debate as we move forward into 2019/20.