IR35 proposal would be devastating, says APSCo

A proposal to give engagers more of role in ensuring IR35 compliance would have a “devastating effect” on the flexibility of the professional labour sector, a staffing body warns.

Most worryingly, clients or agencies could get a tax bill for each contractor they viewed as outside IR35 who was found inside, said the Association of Professional Staffing Companies.   

The effect of this “big commercial risk” for ‘engagers’ – parties not defined by the proposal by HMRC  – is bound to be a protectionist approach by all parties, APSCo said, explaining:

“[They’ll be] a huge increase in false employment, an upward pressure on rates as contractors look to recoup lost income and in the worst case, a loss of skills to other overseas locations.”

Seemingly trying to empathise with the taxman, the association said that nobody would dispute that there can be “a tax benefit” to operating as a personal service company.

“[But] there is also a risk,” it said. “Contractors operating through this model have no employment protection rights – and have no certainty of continuity of work.  

“If HM Revenue & Customs is, as it says, trying to create a level playing field, they will only ensure more of an inequality than exists currently.”

APSCo’s Sam Hurley, a PSC Committee witness, said a list of parliamentarians was being drawn up, as was a series of meetings, to respond to HMRC “in the strongest possible terms.”

“I cannot emphasise strongly enough the devastating effect this [proposal] would have on the professional flexible recruitment market” she said, “and the UK’s ability to compete in a global market”.