News

IR35: consultations, public sector chaos, and the campaign ahead

IR35: every self-employed person knows the story now. They know that from the moment it was introduced, it was too complex to work. They know how many freelancers have been unfairly caught out by it. And they know what a disaster the Government’s changes to IR35 in the public sector were. What you won’t know, however, is what will follow from the Government’s consultation on extending those disastrous changes to the private sector.


Back in May, the Government launched a consultation on ‘Off-payroll working in the private sector’. One of its lead proposals? You guessed it: pushing those ill-conceived changes from the public sector on to the private sector, shifting the responsibility for judging IR35 status from freelancers themselves to the clients who engage them. The public sector is only a fraction of the self-employed, and changing the system there led to mass walkouts, delays and even major projects being cancelled. We can only shudder at the thought of what it might mean in the private sector.

That’s why at IPSE, we’ve been consulting widely with our members to deliver a hard-hitting response to the consultation. Here are a few of the main points we’ve gathered to put to the Government.

  • First, IR35 is so complicated that it's impossible to make accurate determinations. In fact, based on its recent tribunal record, not even HMRC can get it right. The CEST (Check Employment Status for Tax) tool is supposed to simplify the process, but it’s deeply flawed so actually it just makes things worse. And if HMRC and its CEST tool can’t get it right, how can it expect businesses across the UK to?
     
  • Second, the Government seems committed to extending the reforms because of its belief that they have worked in the public sector. IPSE and CIPD research, however, shows that this simply isn’t the case. Instead of engaging with the complexity of IR35, the research found that many public sector bodies simply imposed blanket judgements, leading to many contractors and freelancers moving out of the sector altogether.
     
  • Extending these disastrous changes at any time would be bad, but doing so when business is already dealing with the looming uncertainty of Brexit is sheer madness.
     
  • There is also the matter of productivity. Productivity in the UK has been slumping for some time and tying businesses up in IR35 red tape that stops them accessing freelance talent is likely to make this much worse.
     
  • Finally, the big overarching issue: employment status. There has been confusion about the status of self-employed people for a very long time: it is one of the most important questions hanging over the sector. Taxing more people like employees without giving them the rights that should come with that will only make this confusion worse. The Government is already consulting on how to resolve this confusion: it should wait for the result of this consultation before taking any decisions that could make this matter worse.   

It’s disappointing the prospect of extending the changes has risen at all – and even more disappointing that it should come from a Government that has already done much to harm the self-employed. However, you can be sure that in the consultation and beyond, IPSE will be doing all it can to push back against this ill-conceived and potentially disastrous idea.

Meet the author

Tristan Grove

Press & Public Affairs Officer