“Chilling”, “naive”, “bizarre”, “damaging”, “prohibitive” – just some of the words contractors have used to describe the Government’s proposed extension of IR35 reforms from the public to the private sector.

 

 

Just weeks ago, IPSE – alongside the CIPD – released major research which painted a frightening picture of the legislation’s chaotic impact in the public sector. Behind the statistics, however, the anecdotal evidence from those in the firing line is just as concerning.

 

With next week’s consultation deadline fast approaching, IPSE held a series of focus groups over the last few months to gather the opinions and experiences of members. The responses, which outline the stark and telling reality of the Government’s intentions, will inform IPSE’s official submission.  

As one contractor put it: “The proposal alone is having a chilling effect on individuals, businesses and the economy”.

 

Following the introduction of the public sector reforms in April 2017, we have seen a mass exodus of highly-skilled, specialised contractors forced to walk away from major projects. The result? Stalling major TfL developments and, worse still, contributing to the staffing crisis at the NHS.

 

If extended to the private sector, where many former public sector contractors now reside, IR35 could force contractors to turn down work altogether; exacerbating the economic struggles caused by Britain’s ongoing exit from the EU.

 

“I don’t think I’m alone in this, I would walk away from any contract that insists on applying IR35,” one contractor said. “I would work abroad if necessary.”

 

Worryingly, they are not alone.

 

“I would walk away from any contract that insists that I’m inside IR35,” another told us.

 

“This would cause an absence of highly experienced skill in the UK workplace, which can only be damaging,” said another. “People are in different financial circumstances and developing legislation to tax everybody as a direct employee is prohibitive to keeping many of us in the workplace.

 

“It would cause a fall in tax revenue to HMRC as we would no longer be working. Corporation tax receipts and VAT collected through our limited companies would cease.”

 

If the Government rolls out the changes, organisations in the private sector – many of whom know little about their newfound obligations in determining IR35 statuses – will be burdened with making judgements about what is an extremely complex piece of tax law.

 

There is the real concern that private sector organisations follow the tactic adopted by many public sector bodies who, to prevent themselves falling foul of HMRC, are making blanket assessments – thus incorrectly taxing thousands of legitimately contractors as employees.

 

With the private sector’s blissful ignorance of IR35 under threat, the concern of the contracting community is growing.

 

As one individual put it: “There’s a fair bit of awareness of the proposal (to extend IR35 changes to the private sector) amongst contractors, but definitely not amongst clients – many are completely unaware and totally unprepared.

 

“It's a bizarre that one company should decide the tax affairs of another. After all, you don't ask the window cleaner how they arrange their tax affairs!”

 

Further still, to avoid dealing with the complexities of IR35 altogether, some organisations would steer clear of contractors entirely, another focus group participant worried.

 

“Companies who hire freelancers are going to look at these IR35 obligations and go, ‘no way, it’s easier to go to one of the big four consultancies’, and they don’t have to worry about all this complicated IR35 business. This could turn out to be a really anti-small business move.”

 

The Government's insistence on attacking some of the UK’s most skilled, dynamic workers is particularly puzzling given that it flies in the face of the ‘good work’ narrative. If the Government wants to be taken seriously in its promotion of the ‘good work’ agenda, it must ditch its hellbent pursuit of such inhibiting policies.