We are hearing plenty about IR35 reforms just at the moment and that comes as no surprise.
Many different individuals and organisations are having their say on what they think about the changes. This is evidently a contentious issue as IR35 affects a huge number of businesses and contractors across the whole of the UK. It is provoking many different kinds of responses, although on the whole these are less than positive.
Well, now the Institute of Chartered Accountants in England and Wales (ICAEW) have for the first time published publicly their recommendations to the government. These are recommendations that they sent to the inquiry launched by the Public Accounts Committee back in February 2022.
The Key Points ICAEW's Response
They specifically call out the reforms that stem from 2017 to be nothing but a sticking plaster. They note that it does not “address the root cause of the off-payroll working problem.” The ICAEW have come to the crux of what many others also feel.
That the new system is not one that is fit for purpose. In fact, they feel that this is a very light and temporary solution to a problem that needs more attention. They say that the issue of off-payroll working is a problem that only continues.
They put this down to the advantages of tax and national insurance contributions, especially the cost of employer national insurance contributions. They note that this issue has no solution under current IR35 reforms. The ICAEW do put forward a suggestion for how this issue could be resolved.
They support closer alignment of total tax and national insurance contributions for workers both inside and outside of IR35. They feel that if these costs did not depend upon the nature of employment, then it would reduce the issues. More specifically they support debate around the way that the tax system sees employment and self-employment.
They note that the current attempts to classify different sets of workers such as gig workers into either employed or self-employed categories is not sustainable. They call for a rethink of the whole system. This is to take time to come up with a long-term solution to encompass all different types of workers properly.
This is an interesting way to approach the issue that clearly surrounds IR35. This may not be a welcome approach by all of those working outside IR35. However, there is clearly an issue with many contractors being wrongly categorised.
Organisations do seem to be taking different approaches to the problem from demanding that contractors choose from just a limited suppliers list of expensive umbrella companies, to blanket categorising everyone inside IR35 whatever their status. Whether or not you agree with the approach the ICAEW have put forward, what can be said is that a discussion about the future of IR35 reforms will be welcome.
The ICAEW do put forward a number of other suggestions that are well worth a read. Whether the Public Accounts Committee have done so though will be a question that still needs answering for now.
Will you pass an HMRC IR35 enquiry?
Take our 5 minute online IR35 risk assessment to find out
HMRC’s soft landing period has ended and IR35 enquiries will soon begin in the private sector. Make sure you identify any risk areas and ensure you’re managing it correctly.
Is The Future of Work Just Another Review in the Queue?
In case you did not know, the government have put out a new review.
It is called The Future of Work. If you have seen it, you will know it is awash with colourful pictures and boxes. Yet behind these is the promise to see what work will look like in 2030.
However, the government is getting a bit of a half-hearted response over it. The reason for this? You might think that it is the links to IR35, especially in the wording throughout this government document. However, it is more likely the fact that some respondents feel like they have been here before.
Indeed, it is not the first review of this nature that the government has had in recent times. We only have to look back in time slightly to see the 2018 Employment Status consultation. The government has not yet acted upon the findings of this consultation.
There are also the findings of the independent Taylor Review of Modern Working Practices. This document dates from July 2017 and was requested by the government at the time, that is Theresa May’s government. It forms a singular ambition that “all work in the UK economy should be fair and decent with realistic scope for development and fulfilment.”
It is hard to argue with that sentiment, but it does seem like the current government are ignoring it. So, is The Future of Work going to just be more of the same? Bear in mind that there was not even an Employment Bill in the Queen’s Speech at all this year.
In the blurb at the beginning, the government states that “thanks to government action there are now more employees on the payroll than ever before.” This could well have something to do with the public sector IR35 changes from April 2017. There are 50,000 former PSC workers that joined the public sector as employees in the two years which followed.
However, the National Audit Office does warn of considering them all to be the result of IR35 changes. This is probably wise as there may be multiple reasons for this number and not just one. It will be interesting to see what happens with this review over time.
You have to wonder whether it will be the review that makes a noticeable impact or not. The first part of the review will focus on an assessment on key-strategic issues relating to the future of work. The second part will be a more detailed assessment of select areas coming from the first part.
It will be interesting to see whether those other than traditional employees are highlighted in the second part. In a world where work is changing, contractors, gig workers and those on short-term contracts are increasing. They are also increasingly important to the economy. Some might say this is an area deserving of more focus and attention.
For now, we can only imagine what The Future of Work review will show.
