GK Strategy are delighted to announce the launch our latest briefing paper entitled Reforming IR35: Engaging with the Government’s proposals for off-payroll working in the private sector.
The paper is on the subject of the Government consultation on plans to extend the IR35 reforms to the private sector, following its introduction to the public sector in April last year. The Government instigated these reforms due to concerns that some umbrella companies were marketing themselves as a route to avoiding tax and national insurance. Tax avoidance was possible because PSCs allow workers to register their normal home to work travel expenses as tax deductible by artificially becoming agency workers. The legislative changes demonstrate the extent to which IR35 reforms are driven by considerations around maximising tax revenues. Alongside these measures, HMRC also published a discussion document on the future of IR35 which eventually led to the Government proposing reforms to the legislation in 2016. If these reforms are also enacted in the private sector, they will have a major impact on portfolio companies who use contractors, or companies who supply them such as recruitment or umbrella agencies.
HMRC has estimated that only 10 per cent of contractors that should apply the IR35 legislation do so, and the Exchequer is concerned that the cost of this non-compliance with the rules will reach £1.2bn by 2022/23. Therefore, the government is keen to engage with stakeholders to help increase compliance rates. The consultation is not merely focused on technical details of how the reforms can be extended with the Treasury having already made a decision to move forward, but whether this is indeed the best way for the Government to proceed.
GK’s research team has prepared a briefing paper on the Government’s position and its next steps.