IR35 – What Does this Mean for Recruitment?
I think everyone was hoping that the rumoured changes for the IR35 in the private sector were going to be just that…rumours. Like we’d all hoped before the original IR35 rules came into force in 2000.
But then the Chancellor went ahead and put it into October’s budget. A move that I think is fair to say is not overly welcome in the recruitment sector. It’s more work, more risk, more education and probably more confusion that, frankly, most people I speak to in our sector think we could do without.
The good news, if there is such a thing, is that at least it won’t be coming in until April 2020 to give us all time to prepare. We therefore don’t need to panic but we do need to start doing something about it. We can’t afford to ignore it until the last minute.
When the off-payroll rules came in for the public sector last year, there was a significant impact. Projects that were planned were put on hold due to increased costs. The public sector bodies took time to adjust – the BBC, for example, apparently took six months to start taxing companies at source and I believe they’re still trying to recover the arrears.
In a time where simply the presence of uncertainty around the carbuncle that is Brexit has stunted growth, never mind the city jobs we’re seeing going overseas, does the UK economy really need another reason to pull on the handbrake? The timing could be better and, in my sometimes slightly cynical view, that may be why it’s been delayed until 2020. Perhaps it was just going to have too much collateral damage for 2019 to handle.
At least it’s good news for the public sector. In a time where there’s a real shortage of talent, being disadvantaged because a contractor can work in the private sector without the tax implications has been a real problem over the past 18 months and I’m sure it will continue to be so for the next 18 months until the private sector rules come in.
Whether or not you believe our tax pennies are being spent well, I’m sure you will agree that there should be a fair playing field between the public and private sectors when it comes to IR35. So logically then, does this mean that in the current climate the thing that’s causing the issue isn’t that the new rules are being extended into the private sector, it’s the fact that they came into existence at all last year.
Regardless, it’s not going to change. Let’s face it. If the amount of lobbying done previously didn’t change things, it’s certainly not going to change these plans now. I don’t think I’m being defeatist here, just practical based on the previous level of effort that’s gone into opposing these rules and the lack of impact they had.
It’s time for recruiters to accept it’s happening and start planning. Recruitment businesses not dealing with the public sector and hence not used to these IR35 rules need to adapt for when they come into force for the private sector. Those with an existing pay and bill solution in the back office need to make sure it can cater for these rules without causing an administrative burden. Arguably the biggest change may be for those recruitment businesses without pay and bill solutions, as simply running a contractor book on an Excel spreadsheet isn’t going to be a viable option any longer.
Simon Warburton, Managing Director
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