Review 2017's IR35 changes before extending them in April 2020, HMRC urged

A failure by the taxman to properly assess IR35 reform in the public sector and ‘learn lessons’ blights the hope of smoothly extending it to the private sector, a trio of experts says.

Status firm Qdos, contractor body IPSE and IR35 advisory Bauer & Cottrell even seem to suggest that HMRC’s disregard for public sector IR35 issues renders a further rollout as flawed.

“It is acknowledged that HMRC and HMT has listened to some concerns raised by stakeholders, prior to the roll-out of new IR35 rules for the private sector,” begins Kate Cottrell.

“However…we still have a situation where no proper analysis has been undertaken of how the public sector rules have worked and the true impact, as demonstrated by numerous bodies, has simply been ignored.”

The Bauer & Cottrell co-founder asked: “So how can it be right to continue to claim a resounding success in the public sector when this new consultation aims to change the public sector rules?”

Seb Maley, chief executive of Qdos said: “In the public sector, thousands of contractors have been incorrectly placed inside IR35.

“To introduce [further] IR35 reform -- when there is no proof it has worked in the public sector -- would be short-sighted.”

Both status experts have now submitted their responses to the consultation proposing to extend the public sector’s April 2017 IR35 reforms to the private sector, as has IPSE.

The contractor body (the Association of Independent Professionals and the Self-Employed), told HMRC in its response that there are “unresolved” issues with 2017’s IR35 changes.

“Commission an independent body to conduct a full review of the public sector reform,” the association told HMRC, implying it still distrusts HMT’s May 2018 ‘review.’

IPSE added: “The government has a unique opportunity to comprehensively review the impact the recent reforms have had on the public sector prior to private sector implementation.

“A comprehensive review should be undertaken over at least a full tax cycle since implementation. This should allow issues that occur throughout the tax cycle to be identified, with solutions to tackle issues prior to potential implementation of any private sector changes.”

Bauer & Cottrell agreed, saying yesterday: “We would urge government to gather further information, properly evaluate the public sector position and most importantly take urgent action to tie everything together with the Good Work Plan.”