Contractor bosses criticise Stride over IR35 reform comments

Three experts on contracting have criticised the Treasury for flirting with the idea that the public sector’s ‘shambolic’ off-payroll rules will be extended to the private sector at Autumn Budget 2017.

The Association of Independent Professionals and the Self-Employed, The Association of Professional Staffing Companies and Qdos, an IR35 advisory, yesterday attacked the reported comments of Mel Stride.

“If private sector reform is, in [the financial secretary to the Treasury’s] own words ‘an issue of fairness’, then out of fairness our sector deserves to know the Treasury's plans for the future of IR35 sooner rather than later,” said Qdos chief executive Seb Maley.

A former tax inspector, Maley also took issue with Mr Stride’s assessment to parliament, when the Treasury official said: “Early analysis of tax receipts between April and June shows that around 90,000 additional new engagements occurred in the public sector”.

Stride then told MPs: “This indicates more individuals are being taxed as employees since the reforms, and is consistent with the government's expectations that the reforms would increase tax compliance”.

“That 90,000 contractors are now working inside IR35 in the public sector following reform does not necessarily indicate increased compliance,” the Qdos CEO pointed out.

“While further reform is ill-advised, it can in fact be managed. But the government must learn from its mistakes. The chancellor has an opportunity to shed much needed light on plans for IR35, which we urge him to address in the upcoming Budget.”

But if the comments of Mr Stride are accurate, IPSE believes that it looks like Philip Hammond will be “targeting hard working self-employed people for the second Budget in a row,” on November 22nd.

“Changes to how freelancers operate in the public sector only came in recently and they have been a complete shambles.

“It’s ludicrous the chancellor would even consider extending these rules when the public sector roll-out has been so problematic,” said IPSE policy director Simon McVicker, sounding like he wants the extension ruled out, not just clarified as Qdos suggested.

The association believes that, if the government is “serious” about addressing what it regards as ‘disguised self-employment,’ then it should implement a statutory definition of ‘self-employment.’

But addressing it by extending April’s off-payroll rules to private sector organisations would ‘adversely impact the ability of the economy to source flexible labour,’ warn almost eight in 10 recruiters.

APSCo, which surveyed its member companies to come up with the finding, said: “[The Treasury’s Mr Stride has conveniently glossed over the fast that these [new 90,000 public sector] individuals are likely to be charging higher rates for their services”.

This is the result of the temporary labour market adjusting “by passing on [the] additional tax and NI costs” to the end user” the association said, resulting in the “cost to the public sector for the same resource…[being] greater than before.”

“We all pay taxes and subscribe to the fact that taxation should be fair,” said APSCo operations director Samantha Hurley.

“But there is little doubt that the government is approaching this issue from a position of assuming that all self-employed workers are avoiding taxation, which is simply not the case.”  

A former expert witness to the PSC Committee, Hurley believes the government is “trying to compare ‘apples with pears’ by claiming freelance contractors should pay the same in taxation as salaried employees.  

“A self-employed contractor does not have guaranteed continuity of work or benefits associated with ‘employee status’, such as sick pay, and so it is inappropriate to tax them in the same way.”

She added: “We believe that a move to change legislation…[to the] off-payroll [rules] in the private sector at this time is ill-conceived, and for the government to take this step would be immensely damaging to the professional flexible labour market and wider UK economy.”