The Chancellor of the Exchequer is preparing to announce the extension of IR35 rules to the private sector in his Budget announcement later this month.
According to reports from the BBC, Philip Hammond will target people who set themselves up as private companies to avoid paying National Insurance contributions.
HM Treasury believes that around one-third of people claiming self-employed status as a ‘personal service company’ are in fact employees and should pay more tax.
Under IR35, the hiring organisation takes on responsibility for determining the tax status of ‘off-payroll’ workers. These rules already apply to public sector organisations.
Tania Bowers, General Counsel at the Association of Professional Staffing Companies (APSCo), said that it was extremely disappointed that the warnings from business organisations over the implications of rolling-out IR35 to the private sector appear to have been discounted.
“Like the Confederation of British Industry (CBI) and The Association of Independent Professionals and the Self-Employed (IPSE), we maintain that these proposals will have an adverse impact on the strength of the UK’s labour market and wider economy at a critical time,” said Bowers.
“While there is yet no indication that any changes will take effect in April 2019, the fact that the announcement is set to be included in the upcoming Budget – along with the government’s track record on such matters – means that this could well be HMT’s intention.”
She urged the government to allow time for businesses to upskill their workforce to enable them to make appropriate status determinations and to update their systems and processes to cope with the new rules. This is particularly crucial for payroll and invoicing payment systems, many of which are not currently capable of processing off payroll placements.
“We remain hopeful that HMT and HMRC have the good sense to consider, and take heed of, the advice offered in consultation responses from those who know what’s happening on the ground. To ignore such insights would be irresponsible and damaging,” she added.
The Chancellor will announce his Budget on 29 October.
