IR35 consultation ‘set for early in the new year’

An online response by the government to the petition against private sector IR35 reform is interesting contracting experts much less than what’s going on behind-the-scenes.

In fact, while one adviser to contractors says the response is “simply a regurgitation” of the Treasury’s stance on IR35, another says a consultation on reforming it looks set for January.

“I've met with HMRC’s policy team twice, [and] it appears the consultation [announced at Autumn Budget] will be issued early in the new year,” said Graham Fisher, at Orange Genie.

‘Little or no impact’

Another contractor tax firm boss, Carolyn Walsh of Andraste Accounting, points out that in recent years, responses to consultations affecting contractors have “had little or no impact.”

“Each consultation document [of late] laid out the proposed changes in legislation … and we saw that [same] proposition rolled out in the next Finance Bill,” she said.

This is perhaps why companies are already preparing for April 2017’s IR35 changes to be rolled out beyond the public sector, regardless of what the 2018 consultation throws up.

Preparing now

“HMRC is right now doing a lot of work with public sector bodies and the big engagers in the private sector,” Walsh, a former tax official said yesterday. “These are getting advice from HMRC customer care teams like never before.”

“[And] tax advisers are [meanwhile] assisting engagers of contract labour to put in place systems and processes that enable proper management of IR35, which means if IR35 [reform] is extended to the private sector in 2019 or 2020, there would be little or no impact on contractors as the compliance work would have been already done”.

‘Done deal’

But fresh from his meetings with HMRC, Fisher says that reforming IR35 in the private sector -- by using the public sector’s new off-payroll rules -- is not a ‘cut and dried’ situation.

“They [the Revenue] are keen to emphasis that extending the public sector changes into the private sector is not a ‘done deal,’” he said. “It is but one option -- they are open to other suggestions”.

‘Real opportunity’

Either way, consultation is the way to go for a potential fix to an age-old problem, according to IR35 expert Kate Cottrell.

“This is a real opportunity to for a joined-up approach to deal with IR35, status and employment rights, as part of the same issue,” she says.

“All elements are important and complex, which the government claims it recognises. If they are really listening, then this is the approach they must take.”

But the Bauer & Cottrell co-founder expects the IR35 consultation to launch no earlier than March, not in the ‘early new year.’ “This newly published timetable by the government suggests to me a consultation in the Spring, [with] confirmation announced in Budget 2018 in November, potentially allowing for implementation in April 2019”.

‘Start now’

Yet she added that even assuming this more drawn out timetable, “everyone including the external members of the IR35 Forum are pressing for [a] delay”, mainly because they first want to see the results of the public sector rollout.

Cottrell, a former tax inspector, also issued a warning: “Based on what we have seen thus far, the rollout to the private sector is a case of when rather than if.

“Everyone needs to sit up and take notice -- contractors, agencies and of course end clients. Contractors in the private sector are best placed to start raising awareness of IR35 with end-clients now.”